Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (December 2017)
52 slides from Citizens Financial's debt investor presentation, December 2017
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation December 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 3
Slide 4: Company overview and strategy
Company overview and strategy
Slide 5: Key investment highlights
Key investment highlights 12th largest retail bank holding company in the U.S. with a strong Attractive, competitive position in a well-diversified geographic footprint client-centric franchise with Attractive business mix with improving profitability scale Client-centric model focused on deepening
Slide 6: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets $151.4 billion in total assets(1) Robust deposit market share of 12% in top 10 MSAs(2) – #2 deposit market share in New England(2) Diverse economies/affluent demographics CFG corporate headquarters Providence, RI CFG branch location Serve
Slide 7: Substantial progress in prudently growing the balance sheet
Substantial progress in prudently growing the balance sheet Top 5 deposit market share in 9 of 10 largest MSAs(4) Dimension(1) Rank(2) $90.9 billion $106.1 billion Assets: $151.4 billion #12 2012(11) 3Q17(11) Loans: $110.2 billion(3) #11 #12 nationally; Deposits: $113.2 billion Top 5 rank in 9/10 ma
Slide 8: Turning the corner — elevated our mission & sharpened how we will differentiate
Turning the corner — elevated our mission & sharpened how we will differentiate We have executed well on our turnaround plan We have built a solid foundation with multiple levers to continue to improve our performance to peer median and beyond Turning Entering a new phase focused on becoming a top-p
Slide 9: Improving financial performance
Improving financial performance 9
Slide 10: Making consistent progress against our financial goals
Making consistent progress against our financial goals Strong execution against all strategic initiatives and continued momentum ROTCE(1) IPO-based Efficiency ratio(1) IPO-based (Return on average tangible common equity) medium-term medium-term target target 10.1% 10%+ 68.5% 69.8% 8.6% 66.0% ~60% 68
Slide 11: Delivered attractive balance sheet and revenue growth YTD
Delivered attractive balance sheet and revenue growth YTD YTD3Q17 vs. YTD3Q16 A strong platform well-positioned to drive value Strong loan growth Growing revenues faster Strong NIM expansion (Average total loan growth) (Total revenue growth) (Net interest margin change) 10.7% 6.4% vs Peers vs Peers
Slide 12: Continued focus on expense control and improving returns
Continued focus on expense control and improving returns YTD3Q17 vs. YTD3Q16 Well-controlled expenses; Strong operating leverage Efficiency improvement (YoY Positive operating leverage(1)) (Efficiency ratio(1) change) investing for growth (Noninterest expense change) vs Peers 7.0% vs Peers vs Peers
Slide 13: 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 14: Further opportunities to improve returns: BSO
Further opportunities to improve returns: BSO Since 3Q13, delivered ~580 basis points of improvement in ROTCE to 10.1%(1) Balance Sheet Optimization (“BSO”) Improve risk-adjusted returns and NIM while driving growth Enterprise-wide initiative with the same intensity and rigor as our TOP efficiency p
Slide 15: Further opportunities to improve returns: Growth in fee income businesses
Further opportunities to improve returns: Growth in fee income businesses Fee Income Consumer Commercial Wealth Capital & Global Markets Investments in FCs and sales, technology Broaden capabilities in DCM, M&A, CRE platforms and products with shift toward managed money New FX options/currency swaps
Slide 16: Further opportunities to improve returns: TOP
Further opportunities to improve returns: TOP Continuous improvement - TOP programs Self-fund investments through efficiency, expense discipline and mindset of continuous improvement Use new technologies to deliver more effective outcomes at lower costs TOP IV program targeting run-rate pre-tax bene
Slide 17: 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 10.0% Net interest income positioned to continue to benefit from rising rates ─ Our asset sensitivity remained relatively 6.2% 5.8% 5.4% stable at 5.4% 3.9% Securiti
Slide 18: 3Q17 key messages
3Q17 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%
Slide 19: Capital and liquidity
Capital and liquidity 3* Citizens Financial Group, Inc.”
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 FITB 10.6% 15.2% Continue to maintain strong CET1 capital position relative to our peers MTB 11.0% 14.9% ─ Expect annual normalization of ~40 bps given both capital return and strong loan growth RF 11.3%
Slide 21: 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 22: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 92% U.S. Agency MBS $25.3 2.41% $25.7 2.43% $0.9 $0.8 3% AAA-rated non-agency $1.0 $0.8 Total HTM $4.0 $4.3 20% of total earning assets, in line with peers $0.3 $0.4 Primary goal is to provide a source of hi
Slide 23: Strong deposit base, with opportunities to grow stable deposits cost-effectively
Strong deposit base, with opportunities to grow stable deposits cost-effectively Consumer Data & analytics drive holistic and personalized customer $112.9 billion 3Q17 average deposits targeting models across all programs and products 82% Core(1) Executing targeted mobile and online digital customer
Slide 24: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities (1) 17.9% 16.0% 15.2% 13.4% 12.5% 12.0% 11.9% 9.7% 8.5% 8.2% 6.4% PNC FITB BBT KEY USB Peer Avg CFG STI MTB CMA RF FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordi
Slide 25: Risk management
Risk management 3* Citizens Financial Group, Inc.”
Slide 26: 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 to to
Slide 27: Diversified and granular loan mix
Diversified and granular loan mix $57.8 billion $52.4 billion 3Q17 retail portfolio 3Q17 commercial portfolio(3) Business Non-Core Banking Non-Core Other Out of Residential 25% footprint(1,2) Leases 2% Out of Education Finance 4%2% 5% 34% Mortgage 5% footprint(1,2) 13% 29% 13% Midwest Credit Cards 1
Slide 28: 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 runoff Net charge-offs Non-performing loans $s in millions $s in billions $1,849 $2.4 $1.
Slide 29: 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 improving 2014
Slide 30: Risk management
Risk management 3* Citizens Financial Group, Inc.”
Slide 31: Core retail portfolio
Core retail portfolio Highlights 3Q17 $56.5 billion core retail portfolio(1) Weighted-average core FICO score of 761 by Product type by Geography by refreshed FICO 64% of the retail portfolio has a FICO score Other Mortgage Out of of >750 New 800+ <600 Education 4% 29% Footprint England 35% 3% 600-6
Slide 32: 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 3Q17 $ billions Loan Loss Loan Loss (1) (1) $56.7 Mix rate Mix 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
Slide 33: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 3Q17 $16.5 billion core mortgage portfolio Jumbo mortgages originated primarily within the by Refreshed CLTV (1) by Refreshed FICO (1) Bank’s lending footprint Predominately in-footprint with a weighted-average 90-100% > 800 refreshed FICO score of 780 and
Slide 34: Core home equity portfolio
Core home equity portfolio(1) Highlights 3Q17 $13.5 billion HELOC 3Q17 $1.5 billion HELOAN 53% of the portfolio is secured by 1st lien by Lien position (2) by Lien position (2) Weighted-average FICO of 766 92% has an LTV of less than 80% 2nd 1st 34% 3Q17 HELOC originations of $1.3 billion 52% 48% 2n
Slide 35: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of September 30, 2017 Between 2017 – 2020, $2.7 billion in drawn balances 2015 – $1.26 billion 2016 – $916 million 2017 – $1.09 billion ($3.0 billion of undrawn balances) are scheduled to 3% 3% 1% 1% 3% 1% 3% 3% 3% mature, or 20%, of the
Slide 36: Auto portfolio credit metrics
Auto portfolio credit metrics Highlights(1) 3Q17 $13.3 billion Auto portfolio Auto Finance portfolio – purchase only, no (2) by Refreshed FICO score (1,2) by Origination LTV leasing, weighted-average FICO score of 728 < 620 % new car ≥ 120% ≤ 80% − 3Q17 originations of $1.4 billion with > 800 9% 63%
Slide 37: Core education finance portfolio overview
Core education finance portfolio overview Highlights 3Q17 $7.8 billion core education finance portfolio Core education finance portfolio average FICO score of 776 (1) by Refreshed FICO by Segment (1) and co-sign rate of 46% 95% of InSchool loans co-signed with average FICO of 773 > 800 35% < 620 Edu
Slide 38: Education refinance portfolio overview
Education refinance portfolio overview Highlights 3Q17 $5.3 billion education refinance portfolio Education refinance product largely mitigates two greatest student by Portfolio lending risks: Citizens − Did the borrower graduate? ERL − Did the borrower gain employment? 62% Education refinance portf
Slide 39: Consumer unsecured
Consumer unsecured* Highlights 3Q17 $1.7 billion consumer unsecured portfolio Launched merchant partnership financing in 3Q15 $s in millions Developing strategic partnerships designed around $1,691 high-quality merchant partnership offerings $1,456 $1,216 − Partnerships utilize loss-sharing arrangem
Slide 40: Core commercial portfolio overview
Core commercial portfolio overview Highlights 3Q17 $51.5 billion core commercial portfolio Asset quality relatively stable and credit performance by Industry Sector(1) has returned to pre-crisis levels Arts, Entertainment, & Recreation All Others(3) Automotive Overall credit risk is moderate and com
Slide 41: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 3Q17 $10.7 billion Commercial Real Estate Line of Business(1) Continued progress in uptiering portfolio to by Facility Type by Property Type larger, more well-capitalized institutional Other CRE collateral Hospitality and upper middle marke
Slide 42: Appendix – Key performance metrics, Non-GAAP financial measures and reconciliations
Appendix – Key performance metrics, Non-GAAP financial measures and reconciliations
Slide 43: 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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 2017 2016 2016 $ % $ % $ % Noninterest inc ome, Adjusted: Non
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 QUA RTERLY TRENDS FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 2017 2016 2016 $/bps % $/bps % $/bps % Operating leverage: T
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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 2017 2016 2016 $/bps % $/bps % $/bps % Tangible book value pe
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 QUA RTERLY TRENDS FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 4Q16 3Q16 2Q17 3Q16 2017 2016 2016 $ % $ % $ % Other inc ome, A djusted Other in
Slide 47: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 2017 2016 2016 $/bps % $/bps % $/bps % Nonint
Slide 48: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 2017 2016 2016 $/bps % $/bps % $/bps % Operat
Slide 49: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying results $s in millions, except share, per share and ratio data QUARTERLY TRENDS FOR THE NINE MONTHS ENDED SEPT 30, 3Q17 Change 2017 Change 3Q17 2Q17 1Q17 3Q16 2Q17 3Q16 2017 2016 2016 $/bps % $/bps % $/bps % Return
Slide 50: 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 SEP. 30 JUN. 30, MA R. 31, DEC. 31, SEP. 30, JUNE 30, MA R. 31, DEC. 31, SEP. 30, JUNE 30, MA R. 31, DEC. 31, SEP. 30, JUNE 30, MA R. 31, DEC. 31
Slide 51: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except ratio data FOR THE NINE MONTHS ENDED SEPT 30, 2017 Change 2017 2016 2016 $ % Noninterest income, Underlying/Adjusted (non-GAAP) $1,141 $1,053 $88 8.4 % Total revenue, Underlying/Adjusted (non-GAAP) 4,234
Slide 52: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Debt Investor Presentation (December 2017) on 6ix