Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2022 Earnings Presentation
36 slides from Citizens Financial's earnings presentation, Apr 29, 2022
Slide 1: 1Q22 Financial Results
1Q22 Financial Results April 19, 2022
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: 1Q22 GAAP financial summary
1Q22 GAAP financial summary Q/Q Y/Y $s in millions 1Q22 4Q21 1Q21 $/bps % $/bps % Net interest income $ 1,147 $ 1,126 $ 1,117 $ 21 2 % $ 30 3 % Noninterest income 498 594 542 (96) (16) (44) (8) Total revenue 1,645 1,720 1,659 (75) (4) (14) (1) Noninterest Expense 1,106 1,061 1,018 45 4 88 9 Pre-prov
Slide 4: 1Q22 Underlying financial summary
1Q22 Underlying financial summary(1) Q/Q Y/Y $s in millions 1Q22 4Q21 1Q21 $/bps % $/bps % Net interest income $ 1,147 $ 1,126 $ 1,117 $ 21 2 % $ 30 3% Noninterest income 498 594 542 (96) (16) (44) (8) Total revenue 1,645 1,720 1,659 (75) (4) (14) (1) Noninterest expense 1,058 1,010 998 48 5 60 6 Pr
Slide 5: Overview
Overview(1) ■ Underlying net income of $476 million and EPS of $1.07 ■ Underlying PPNR of $587 million, down 17% from 4Q21 and down 11% from 1Q21 reflects lower fees, partially offset by higher NII 1Q22 – NII up 2% QoQ given 9 bps increase in net interest margin and strong loan growth results reflec
Slide 6: Net interest income
Net interest income Robust loan growth and improved rate environment benefiting NII NII and NIM Linked Quarter $s in millions, except earning assets ■ NII up 2% given loan growth and higher net interest margin, partially offset by the reduced benefit from PPP forgiveness $168.0B $169.3B $164.4B $166
Slide 7: Enhanced funding base will drive significant benefit from rising rates
Enhanced funding base will drive significant benefit from rising rates Funding base much better positioned Dramatic improvement in funding for current up-cycle base over-time ■ Funding mix favorable; significant strides in improving Prior up-cycle Current up-cycle quality of deposit base over time P
Slide 8: Noninterest income
Noninterest income Record FX and derivatives; fee results reflect capital markets disruption and expected seasonality $ Linked Quarter $s in millions 1Q22 4Q21 1Q21 Q/Q Y/Y ■ Noninterest income decreased 16% Capital markets fees $ 93 $ 184 $ 81 $ (91) $ 12 – Capital markets fees declined from record
Slide 9: Noninterest expense
Noninterest expense(1) Continued expense discipline and efficiency initiatives helping to combat inflation pressures Underlying, as applicable $ Linked Quarter $s in millions 1Q22 4Q21 1Q21 Q/Q Y/Y ■ Underlying noninterest expense up 5%, which includes Salaries & employee benefits $ 588 $ 546 $ 548
Slide 10: Loans and leases
Loans and leases Strong average loan growth of 3%, with commercial up 3% led by C&I Average loans and leases(2) Linked Quarter $s in billions ■ Average loans up $3.9 billion, or 3% $122.8 $123.5 $122.6 $125.2 $129.2 – Reflects 3% growth in retail driven by mortgage, auto and home equity $60.9 $60.7
Slide 11: Average funding and cost of funds
Average funding and cost of funds HSBC transaction adds ~$6.3 billion of low-cost deposits 1Q22 Average deposits Linked Quarter $s in billions $150.3 $151.9 $153.0 $155.1 ■ Average deposits up $2.1 billion, or 1%, driven by the $2.9 $146.6 billion impact of the HSBC transaction; down 1% excluding HS
Slide 12: Credit quality overview
Credit quality overview (1) Credit provision benefit, net charge-offs Highlights $s in millions ■ NCOs of $59 million, or 19 bps of average loans and leases, up slightly 0.52% from prior quarter 0.25% 0.19% ■ Nonaccrual loans increased 5 bps to 0.60% of total loans QoQ, largely 0.14% 0.14% $158 tied
Slide 13: Capital remains strong
Capital remains strong $s in billions (period-end) 1Q21 2Q21 3Q21 4Q21 1Q22 Highlights (1)(2) Basel III basis ■ 1Q22 CET1 ratio of 9.7%, compares with 9.9% in 4Q21 Common equity tier 1 capital $ 14.9 $ 15.3 $ 15.6 $ 15.7 $ 15.6 ■ Paid $165 million in common dividends to shareholders Risk-weighted as
Slide 14: Business highlights
Business highlights Citizens well positioned to continue positive trajectory and support our communities • TOP 7 progressing well; targeting pre-tax run-rate benefit of ~$100 million by YE2022 My Banktracker Enterprise Best of Banking 2022 • Completed HSBC branch and Investors acquisitions; signific
Slide 15: FY2022 Revised outlook
FY2022 Revised outlook 2021 2022 Underlying Outlook vs. 2021 Underlying Underlying(1) January Guidance April Guidance CFG ex HSBC/ISBC* CFG ex HSBC/ISBC* Total CFG* Up 10-12%; ~$290-$330 million Up 3-5%; up high single digits ex Up 27-30% or Net interest income $4,512MM higher than January guide PPP
Slide 16: 2Q22 outlook vs. 1Q22
2Q22 outlook vs. 1Q22 2Q22 Underlying Outlook 1Q22 Underlying(1) CFG ex HSBC/ISBC* Total CFG* $1,147MM Up 6-8% reflecting the benefit of higher Up 27-29% or Net interest income rates ~$1,450-$1,480MM Balance sheet Average Loans $129.2B Up 1-2% Up 18-20% Average Earning Assets $169.3B Up slightly Up
Slide 17: Citizens well positioned to continue positive trajectory
Citizens well positioned to continue positive trajectory Key Attributes Transformed bank since IPO – Repositioned Consumer and Commercial Banking businesses, with focus on attractive customer segments 1 and sustainable growth – Significantly modernized and strengthened technology capabilities; digit
Slide 18: Positive outlook for Citizens' 2022 performance
Positive outlook for Citizens' 2022 performance NII will be materially higher given higher rate environment and reaffirmation of strong loan growth – Deposit franchise significantly better than previous cycle – Expecting higher loan growth in Commercial while constraining growth in Consumer to maint
Slide 19: Appendix
Appendix
Slide 20: Notable items outlook
Notable items outlook(1) 2Q22 FY22 impacts Pre-tax Pre-tax ($s in millions except per share data) Integration expenses ~$100 ~$200 HSBC Day 1 CECL provision expense (“double count”)* — 24 ISBC Day 1 CECL provision expense (“double count”)* ~165 ~165 TOP revenue and efficiency initiatives ~10 ~40 Tot
Slide 21: Credit portfolio quality continues to improve
Credit portfolio quality continues to improve Retail portfolio FICOs(1) Commercial portfolio risk ratings(1) $s in billions $s in billions $61.6 $69.8 $57.5 $61.5 6% 5% B- and lower 3% 3% <640 5% 5% 14% 12% 640-679 18% 17% B+ to B 16% 25% 680-739 33% 34% BB+ to BB- 740-799 69% 58% 38% 39% AAA+ to BB
Slide 22: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type December 31, 2021 March 31, 2022 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) $44,500 $555 1
Slide 23: 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 é3% é1% ê19 bps $125.2 $129.2 1.25% $153.0 $155.1 1.06% 4Q21 1Q22 4Q21 1Q22 4Q21 1Q22 Pre-provision profit Net income available to Return on average tangible $s i
Slide 24: Year-over-year Underlying results
Year-over-year Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets é5% é6% ê38 bps $122.8 $129.2 $146.6 $155.1 1.44% 1.06% 1Q21 1Q22 1Q21 1Q22 1Q21 1Q22 Pre-provision profit Net income available to Return on average tangible $s i
Slide 25: Notable items
Notable items(1) Quarterly results for first quarter 2022, fourth quarter 2021, and first quarter 2021 reflect notable items primarily related to integration costs associated with acquisitions, primarily HSBC East Coast branches and online deposits, Investors Bancorp, Inc. and JMP Group LLC, as well
Slide 26: 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 27: Notes continued
Notes continued Notes on slide 15 - FY2022 Revised outlook 1) See note on non-GAAP financial measures. 2) See general note d). Notes on slide 16 - 2Q22 outlook vs. 1Q22 1) See note on non-GAAP financial measures. 2) See general note d). Notes on slide 20 - Notable items outlook 1) See note on non-GA
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 FULL YEAR 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 2021 $ % $ % Total revenue, Underlying: Total revenue (GAAP) A $1,645 $1,720 $1,659 ($75) (4%) ($14) (1%) $6,647 Less: Notable items
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 FULL YEAR 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 2021 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,645 $1,720 $1,659 ($75) (4.33%) ($14) (0.85%) Less: Noninterest ex
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 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) P
Slide 31: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $594 $551 $548 $43 8% $46 8% Less: Notable it
Slide 32: 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 2Q21 Total revenue, Underlying: Total revenue (GAAP) A $1,659 $1,609 Less: Notable items — — Total revenue, Underlying (non-GAAP) B $1,659 $1,609 Noninterest expense, Underlyi
Slide 33: 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 QUARTERLY TRENDS 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 $/bps % $/bps % Total commercial loans, excluding the impact of PPP loans: Total commercial loans (GAAP) A $61,521 $60,350 $60,413 $1,171 2% $1,108
Slide 34: Non-GAAP financial measures and reconciliations - excluding the impact of Acquisitions
Non-GAAP financial measures and reconciliations - excluding the impact of Acquisitions $s in millions, except ratio data QUARTERLY TRENDS 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 $/bps % $/bps % Noninterest expense, excluding Acquisitions: Noninterest expense (GAAP) A $1,106 $1,061 $1,018 $45 4% $88 9%
Slide 35: Non-GAAP financial measures and reconciliations - excluding HSBC Acquisition
Non-GAAP financial measures and reconciliations - excluding HSBC Acquisition $s in millions, except ratio data QUARTERLY TRENDS 1Q22 Change 1Q22 4Q21 1Q21 4Q21 1Q21 $/bps % $/bps % Total Deposits, excluding HSBC Acquisition Impact: Total Deposits (GAAP) A $158,776 $154,361 $151,349 $4,415 3% $7,427
Slide 36: Citizens Financial Group, Inc.
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Citizens Financial Group — Q1 2022 Earnings Presentation on 6ix