Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (June 2016)
42 slides from Citizens Financial's debt investor presentation, June 2016
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation June 2016
Slide 2: Important Information and GAAP/Non-GAAP Information
Important Information and GAAP/Non‐GAAP Information 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. These statements often include the words
Slide 3: Overview
Overview Company overview and strategy Improving financial performance Capital/funding and liquidity Risk management 2
Slide 4: Company overview and strategy
Company overview and strategy 3
Slide 5: Key investment highlights
Key investment highlights 13th largest U.S. retail bank holding company with attractive Attractive, client- demographics in core markets centric franchise Attractive business mix with growing and profitable commercial with scale business complementing strong consumer business Client-centric mo
Slide 6: Strong and experienced Board & leadership team
We are led by a strong and experienced Board & leadership team Since January 2015, have attracted or promoted from within more than 25% of our Executive Leadership Group (top 130) Leadership Team Member Title Board Member Committees Bruce Van Saun Chairman and Chief Executive Officer Bruce Van Saun
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension(2) Rank(3) Top 5 deposit market share in 9 of 10 largest MSAs(1) Assets: $140.1 billion #13 Loans: $101.0 billion #11 Deposits: $102.6 billion #13 Manchester, NH: #1 National Rochester, NY: #4 Branche
Slide 8: Robust product offerings and balanced business mix
Robust product offerings and balanced business mix Consumer Commercial Retail Deposit Services Corporate Banking Mobile/Online Banking Commercial Real Estate Credit/Debit Card Deep client Extensive Franchise Finance Wealth Management + relationships product set Asset Finance Home E
Slide 9: Strong, clean balance sheet funded with low-cost deposits
Strong, clean balance sheet funded with low-cost deposits Well capitalized with a common equity tier 1 capital ratio of 11.6%(1) on a fully phased-in Basel III basis Solid asset quality performance with core net charge-offs of 30 bps(1) in 1Q16 Strong deposit franchise with $84.8 billion of co
Slide 10: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers 1Q16 total capital(1) 15.1% 14.8% 14.7% 14.6% Publicly stated CET1 targets 14.4% 13.9% 13.8% 13.1% 13.1% 12.8% 12.4% CFG ~11% BBT 9.0-10.0% FITB 9.0-9.5% KEY <9.5% MTB <10.0% 11.6% 11.1% 10.6% 10.9% 11.1% 10.6% PNC 8.0-9.0% 9.8% 10.4% 10.4% 9.
Slide 11: Improving financial performance
Improving financial performance 10
Slide 12: Building a top-performing regional bank
Building a top-performing regional bank Where we’ve come from Where we are now Where we’re going Lagging revenue productivity Developed/implemented plan to Well-balanced Commercial and ─ Under-levered balance sheet address underlying issues and Consumer business mix ─ Lack of scale in key busi
Slide 13: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 1Q16 Initiative Commentary Status Retail checking households grew by ~15,000 or 1% vs. 1Q15. Deposits up 5% vs. prior year quarter and services Reenergize household growth charges up 5%. Origination volume up 15% from the prior year quarter, though LOs re
Slide 14: Continuing to drive balance sheet and revenue momentum in 2016
Continuing to drive balance sheet and revenue momentum in 2016 1Q16 vs. 1Q15 A scaled platform well-positioned to drive value Strong loan growth Growing revenues faster Higher NIM expansion (Average total loan growth) (Revenue growth(1,2)) (Net interest margin change(1)) 133 bps 6.7% 4.9% above peer
Slide 15: Expense control and improving returns
With continued focus on expense control and improving returns 1Q16 vs. 1Q15 Well-controlled expenses Strong operating leverage Efficiency improvement (Adjusted noninterest expense(1,2) change) (YoY Adjusted Operating Leverage(1)) (Adjusted efficiency ratio(1) change) 37 bps above peers 294 bps 130 b
Slide 16: Net interest margin improved in 2H15, sustain in 2016
CFG net interest margin improved in 2H15, sustain in 2016 Focusing on optimizing asset growth and minimizing cost of deposits Lower net interest margin compression 2.98% 2.96% 3.01% 2.94% 2.94% 6 bps better than peers 2.86% 2.77% 2.72% 2.76% 2.77% Improving trend 1Q15 2Q15 3Q15 4Q15 1Q16 CFG Peer
Slide 17: Loan yield and deposit cost initiatives
Loan yield and deposit cost initiatives Evaluating and refining targeted growth opportunities to drive risk-adjusted returns Loan portfolio mix strategies Deposit gathering strategies Investing to drive growth in higher-return Improving advertising strategies through analytics with categories su
Slide 18: We remain positioned for rising rates
We remain positioned for rising rates… …but also see plenty of opportunity to further enhance performance by executing well on our initiatives Interest rate sensitivity ranking 11.0% (200 bps gradual increase) Net interest income poised to benefit from rising rates 8.0% ─ ~65-70% of asset sensitiv
Slide 19: Capital/funding and liquidity
Capital/funding and liquidity 18
Slide 20: Stronger capital than peers
Stronger capital than peers Total capital ratio Announced increase in quarterly common stock dividend of 20% to holders on record on May 4, 2016 15.5% 15.3% 15.4% 15.3% 15.1% In 2015, paid $221 million in dividends and repurchased 150 bps $500 million in common stock above peers ─ Dividend payou
Slide 21: Consolidated average balance sheet
Consolidated average balance sheet 1Q16 change from Highlights $s in billions 1Q16 4Q15 1Q15 4Q15 1Q15 $ % $ % Linked quarter: Investments and interest bearing Total earning assets up $2.0 billion, or 2%, with deposits $ 25.5 $ 25.7 $ 27.1 $ (0.1) — % $ (1.5) (6) % loan growth of $2.1 billion, or
Slide 22: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 90% U.S. Agency MBS $24.8 2.48% $23.7 2.42% $0.9 4.30% 2.50% 5% AAA-rated non-agency Total HTM $1.4 3.91% $0.9 $1.1 4.54% $3.8 2.11% 2.22% 18% of total earning assets, in line with peers 5.14% $4.0 $0.
Slide 23: Solid deposit base provides attractive, low-cost funding
Solid deposit base provides attractive, low-cost funding $98.8 billion 2009 average deposits $102.0 billion 1Q16 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 6% Demand 18% 11% 27% Term 30% Checking 16% with Interest 39% 17% Savings & Checking with 35% Money Market Inte
Slide 24: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities(1) 17.7% 15.8% 15.7% 14.9% 14.4% 12.5% 12.3% 11.5% 8.8% 7.5% 6.7% PNC USB FITB BBT KEY Peer Avg CFG MTB STI RF CMA FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordi
Slide 25: Risk management
Risk management 3% Citizens Financial Group, Inc.” 24
Slide 26: Diversified and granular loan mix
Diversified and granular loan mix $53.0 billion $48.0 billion 1Q16 retail portfolio 1Q16 commercial portfolio Business Non-Core Non-Core Out of Banking 0.3% Other Out of 25% footprint(1,2) Leases 31% Education Finance 2%4% 6% footprint 8% Home 8% Credit Cards 15% Midwest 3% Equity 13% Midwest 32% CR
Slide 27: 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 run off Net charge-offs Non-performing loans $s in millions $s in billions $1,849 $2.
Slide 28: Credit expected to remain favorable
Credit expected to remain favorable Credit costs gradually normalizing with modest reserve build to fund continued loan growth Allowance metrics stable NCOs stable, comparable to peer average (Net charge off ratio) 1.27% 1.24% 1.23% 1.23% 1.21% 0.33% 0.31% 0.37% 0.27% 0.31% 1.10 x 1.12 x 1.10 x 1.09
Slide 29: Core retail portfolio
Core retail portfolio Highlights 1Q16 $51.0 billion core retail portfolio Weighted-average FICO score of 757 by Product type by Geography (1) 61% of the retail portfolio is > 750 Education Finance Other Core Mortgage – average portfolio FICO of Out of Footprint 2% Cards 9% New England 771 and
Slide 30: Core home equity portfolio
Core home equity portfolio(1) Highlights 1Q16 $14.5 billion HELOC 1Q16 $2.2 billion HELOAN 52% of the portfolio is secured by 1st lien by Lien position(2) by Lien position (2) Weighted-average FICO of 764 86% has an LTV of less than 80% 2nd 1st 32% 1Q16 HELOC originations of $1.5 billion 49%
Slide 31: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of March 31, 2016 In no single year is the maturing population balance greater 2013 – $668 million 2014 – $899 million 2015 – $1.26 billion than $2.0 billion 2% Between 2016 and 2018, $3.9 billion ($3.7 billion core and $135 2%4% 15%
Slide 32: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 1Q16 $13.1 billion core mortgage portfolio Jumbo mortgages originated primarily within (1) (1) by Refreshed CLTV by Refreshed FICO the Bank’s lending footprint 90-100% 100%+ <600 600-649 Predominately in-footprint with a weighted 80-89% 3%1% 3% 650-699
Slide 33: Auto portfolio credit metrics
Auto portfolio credit metrics $s in billions Highlights(1) 1Q16 $13.9 billion Auto portfolio Auto Finance portfolio – purchase only, no (2) by FICO score(1,2) by LTV leasing, weighted-average FICO score of ≤ 600 601-649 ≥ 120 ≤ 80 734 5% ≥ 800 11% 16% 22% 8% 1Q16 originations of $1.5 billion wit
Slide 34: Core education finance portfolio overview
Core education finance portfolio overview Highlights 1Q16 $4.7 billion core education finance portfolio Core education finance portfolio average FICO score of 771 and (1) by Refreshed FICO by Segment co-sign rate of 55% <650 2%7% 650-699 Acquired 95% of InSchool loans co-signed with average port
Slide 35: Commercial portfolio overview
Commercial portfolio overview Highlights 1Q16 $48.0 billion commercial portfolio Asset quality relatively stable and has reached (1) by Industry Sector pre-crisis levels Overall credit risk is moderate and compares well with All Other(3) peers 13% Real Estate Lessors 20% – $20.7 billion shared n
Slide 36: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 1Q16 $9.0 billion Commercial Real Estate Line of Business (1) Strategy to up tier portfolio to larger, more well- by Facility Type by Property Type capitalized institutional and upper middle-market Land Hospitality Other CRE Collateral bo
Slide 37: Oil & Gas portfolio overview
Oil & Gas portfolio overview 1Q16 Oil & Gas Outstandings Highlights Well-diversified portfolio with ~100 clients Tota l Uti l i zed Cri ti ci zed Nona ccrua l Includes $339 million of corporate aircraft leases arising from $s i n mi l l i ons O/S % % s ta tus Asset Finance Les s pri ce-s ens i t
Slide 38: Non-core portfolio overview
Non-core portfolio overview $s in billions Non-core assets Highlights $20.5 $20.5 billion of assets identified as Non-Core in June 2009; only $17.3 $2.2 billion remain $13.4 ─ Down 62% from end of 2012 ─ Represents ~2% of total loan portfolio $8.4 SBO portfolio 73% home equity loans and 27% HELO
Slide 39: Appendix
Appendix 3% Citizens Financial Group, Inc.” 38
Slide 40: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions FOR THE QUARTER ENDED MARCH 31, 2016 2015 2016 Change from 2015 Noninterest income, excluding special items: Noninterest income (GAAP) $330 $347 Less: Special items — — Noninterest income, excluding spec
Slide 41: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE QUARTER FOR THE YEAR ENDED MARCH 31, ENDED DECEMBER 2016 2009 Pro forma Basel III fully phased-in common equity tier 1 capital ratio1: Common equity tier 1 (regulatory) $13
Slide 42: Citizens Financial Group, Inc.
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