Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2021 Earnings Presentation
33 slides from Citizens Financial's earnings presentation, Apr 16, 2021
Slide 1: 1Q21 Financial Results
1Q21 Financial Results April 16, 2021
Slide 2: Forward-looking statements and use of non-GAAP financial measures
Forward-looking statements and use of non-GAAP financial measures Forward-Looking Statements. This document contains forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends, as wel
Slide 3: 1Q21 GAAP financial summary
1Q21 GAAP financial summary Q/Q Y/Y $s in millions 1Q21 4Q20 1Q20 $/bps % $/bps % Net interest income $ 1,117 $ 1,129 $ 1,160 $ (12) (1) % $ (43) (4) % Noninterest income 542 578 497 (36) (6) 45 9 Total revenue 1,659 1,707 1,657 (48) (3) 2 — Noninterest Expense 1,018 1,012 1,012 6 1 6 1 Pre-provisio
Slide 4: 1Q21 Underlying financial summary
1Q21 Underlying financial summary(1) Q/Q Y/Y $s in millions 1Q21 4Q20 1Q20 $/bps %/bps $/bps %/bps Net interest income $ 1,117 $ 1,129 $ 1,160 $ (12) (1) % $ (43) (4)% Noninterest income 542 578 497 (36) (6) 45 9 Total revenue 1,659 1,707 1,657 (48) (3) 2 — Noninterest expense 998 970 979 28 3 19 2
Slide 5: Overview
Overview(1) ■ Underlying net income of $626 million and EPS of $1.41 ■ Revenue of $1.7 billion stable YoY and down 3% QoQ, demonstrating our diversification and resilience ■ Underlying PPNR of $661 million, down 10% from 4Q20 and 3% from 1Q20 – QoQ decrease tied to lower mortgage revenue and seasona
Slide 6: Net interest income
Net interest income Disciplined deposit pricing and improved rate environment help moderate margin pressure NII and NIM Highlights $ in millions, except earning assets Linked Quarter $162.4B $160.2B $163.5B $164.4B $150.9B ■ NII down 1% – Given lower day count, with broadly stable net $1,160 $1,160
Slide 7: Noninterest income
Noninterest income Noninterest income up 9% YoY, paced by strength in Capital Markets, Mortgage and Wealth $ Highlights $s in millions 1Q21 4Q20 1Q20 Q/Q Y/Y Linked Quarter Mortgage banking fees $ 165 $ 193 $ 159 $ (28) $ 6 Service charges and fees 99 104 118 (5) (19) ■ Noninterest income decreased
Slide 8: Noninterest expense
Noninterest expense(1) Underlying, as applicable $ Highlights $s in millions 1Q21 4Q20 1Q20 Q/Q Y/Y Salaries & employee benefits $ 548 $ 519 $ 539 $ 29 $ 9 Linked Quarter Equipment & software 148 140 132 8 16 ■ Underlying noninterest expense up 3% Outside services 132 131 117 1 15 Occupancy 79 78 80
Slide 9: Loans and leases
Loans and leases Average loans up 1% YoY with commercial up 2% and retail up 1%; broadly stable QoQ Average loans and leases(1) Highlights $s in billions Linked Quarter $128.8 $124.9 $123.5 $122.8 $121.1 ■ Average loans broadly stable – Commercial down $638 million, or 1%, reflecting line $59.5 $67.
Slide 10: Average funding and cost of funds
Average funding and cost of funds Average deposits up 16% YoY and 1% QoQ; continue to drive down cost of funds Growing lower-cost deposits(1) Highlights $s in billions Linked Quarter $141.6 $141.4 $145.3 $146.6 ■ Average deposits up 1% with growth in demand $126.6 deposits, savings and money market,
Slide 11: Credit quality
Credit quality(1) Provision for credit losses, net charge-offs Highlights $s in millions ■ NCOs of $158 million decreased $32 million driven by commercial. 1Q21 commercial results include one large $600 charge-off related to a financial sponsor $464 $428 0.61% 0.52% ■ Nonaccrual loans decreased $11
Slide 12: Allowance for credit losses
Allowance for credit losses Allowance for Credit Losses Reserve Coverage 4Q20 1Q21 $2,670 $62 Retail 2.01% 1.72% $2,372 $(158) Commercial ex. PPP(3) 2.50% 2.37% $(61) $(142) 2.24% 2.03% $1,747 Total CFG ex. PPP(3) Select commercial areas: Areas stabilized: Retail trade Energy & related Educational s
Slide 13: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 1Q20 2Q20 3Q20 4Q20 1Q21 ■ 1Q21 CET1 ratio of 10.1%, up from 10.0% in 4Q20, Basel III basis (1)(2) slightly above our target 9.75%-10.0% operating range Common equity tier 1 capital $ 14.0 $ 14.2 $ 14.3 $ 14.6 $ 14.9 ■
Slide 14: Business highlights and strategic priorities
Business highlights and strategic priorities Group E2E digital ■ E2E digital transformation to increase sales and ■ Secured ~$1.8 billion in new PPP loans through 2021 transformation drive self-service interactions program, providing critical funding to over ~30,000 small business customers ■ Levera
Slide 15: 2Q21 outlook vs. 1Q21
2Q21 outlook vs. 1Q21 We offer commentary on factors influencing key categories 1Q21 Underlying(1) 2Q21 Underlying outlook(1) ■ NII up 2.0-2.5% Net interest ■ $1,117 million ■ Loan growth of 1.5-2%; earning assets broadly stable income ■ NIM up modestly, broadly stable ex-elevated cash ■ Down high s
Slide 16: Key messages
Key messages ■ Citizens 1Q21 results demonstrate strength and resiliency of franchise, along with continued strong execution ■ Results reflect the benefit of Citizens' diversified business model – Revenue of $1.7 billion stable YoY and down 3% QoQ – Strength in Capital Markets, record results in Wea
Slide 17: Appendix
Appendix 17
Slide 18: 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 ê 10% Stable é 34 bps $123.5 $122.8 $737 1.44% $661 1.10% 4Q20 1Q21 4Q20 1Q21 4Q20 1Q21 Net income available to Return on average tangible Average deposits co
Slide 19: 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 $678 ê 3% Stable é 129 bps $661 $121.1 $122.8 1.44% 0.15% 1Q20 1Q21 1Q20 1Q21 1Q20 1Q21 Net income available to Average deposits Return on average tangible co
Slide 20: Mortgage banking
Mortgage banking Mortgage volumes remain strong; gain-on-sale margins trending lower from elevated levels Mortgage banking fees Maintaining strength in a transitioning market $s in millions $915 ■ Industry estimates for originations of ~$3.5 trillion for FY21, down ~15% from historical highs – Refi
Slide 21: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type December 31, 2020 March 31, 2021 Loans and Allowance Coverage Coverage Loans and Allowance Coverage Coverage (in millions) Leases (ex-PPP)(2) Leases (ex-PPP)(2) Allowance for Loans and Lease Losses Commercial and industrial(1) $44,173 $821 1.
Slide 22: Commercial credit – diversified portfolio with prudent credit discipline
Commercial credit – diversified portfolio with prudent credit discipline 4Q20 1Q21 % of % of Highlights Industry sectors Total Areas of Total Areas of $s in billions Balance CFG Concern Balance CFG Concern Real Estate and Rental and Leasing $ 13.9 11 % $ 13.9 11 % Overall Retail and hospitality 2.4
Slide 23: Retail credit - diversified portfolio with prudent credit discipline
Retail credit - diversified portfolio with prudent credit discipline 4Q20 1Q21 % of Retail portfolio % of WA Nonaccrual total WA Nonaccrual $in billions Balance total CFG FICO $ % Balance CFG FICO $ % Residential mortgage $ 19.5 16 % ~785 $ 0.17 0.86 % $ 19.2 16 % ~785 $0.24 1.25 % Home equity 12.1
Slide 24: Notable Items
Notable Items(1) First quarter 2021, fourth quarter 2020 and first quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives. The 2020 results also reflect notable items related to integration costs primarily tied to the August 1, 2
Slide 25: 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 26: Notes continued
Notes continued Notes on slide 15 - 2Q21 outlook vs. 1Q21 1) See above note on non-GAAP financial measures. Notes on slide 16 - Key messages 1) See above general note e). 2) See above note on non-GAAP financial measures. Notes on slide 18 - Linked-quarter Underlying results 1) See above note on non-
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 1Q21 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $ % $ % Total revenue, Underlying: Total revenue (GAAP) A $1,659 $1,707 $1,657 ($48) (3%) $2 —% Less: Notable items — — — — — — — Total revenue
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 1Q21 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,659 $1,707 $1,657 ($48) (2.86%) $2 0.07% Less: Noninterest expense (GAAP) C 1,018
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 1Q21 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) P
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 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $548 $537 $549 $11 2% ($1) —% Less: Notable i
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 1Q21 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Total loans, excluding the impact of PPP loans: Total loans (GAAP) A $122,195 $123,090 $127
Slide 32: Non-GAAP financial measures and reconciliations - excluding elevated cash
Non-GAAP financial measures and reconciliations - excluding elevated cash $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q21 Change 1Q21 4Q20 1Q20 4Q20 1Q20 $/bps % $/bps % Net interest income, FTE excluding the impact of elevated cash: Net interest income, FTE (GAAP) A $1,
Slide 33: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q1 2021 Earnings Presentation on 6ix