Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q2 2021 Earnings Presentation
33 slides from Citizens Financial's earnings presentation, Jul 20, 2021
Slide 1: 2Q21 Financial Results
2Q21 Financial Results July 20, 2021
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 Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends, as well as the potential effects o
Slide 3: 2Q21 GAAP financial summary
2Q21 GAAP financial summary Q/Q Y/Y $s in millions 2Q21 1Q21 2Q20 $/bps % $/bps % Net interest income $ 1,124 $ 1,117 $ 1,160 $ 7 1 % $ (36) (3) % Noninterest income 485 542 590 (57) (11) (105) (18) Total revenue 1,609 1,659 1,750 (50) (3) (141) (8) Noninterest Expense 991 1,018 979 (27) (3) 12 1 Pr
Slide 4: 2Q21 Underlying financial summary
2Q21 Underlying financial summary(1) Q/Q Y/Y $s in millions 2Q21 1Q21 2Q20 $/bps %/bps $/bps %/bps Net interest income $ 1,124 $ 1,117 $ 1,160 $ 7 1 % $ (36) (3) % Noninterest income 485 542 590 (57) (11) (105) (18) Total revenue 1,609 1,659 1,750 (50) (3) (141) (8) Noninterest expense 980 998 960 (
Slide 5: Overview
Overview(1) ■ Underlying net income of $656 million and EPS of $1.46 reflects diversity across fee income businesses given growth and build out of our business model, good expense control and excellent credit results ■ Underlying PPNR of $629 million, down 5% from 1Q21 and 20% from 2Q20, largely ref
Slide 6: Net interest income
Net interest income Modest loan growth and disciplined deposit pricing offset lower loan yields NII and NIM Highlights $ in millions, except earning assets Linked Quarter $162.4B $160.2B $163.5B $164.4B $166.3B ■ NII up 1% $1,160 $1,137 $1,129 – Given interest-earning asset growth and higher day $1,
Slide 7: Noninterest income
Noninterest income Noninterest income down 11% QoQ, 6% growth excluding Mortgage; record Capital Markets and Wealth $ Highlights $s in millions 2Q21 1Q21 2Q20 Q/Q Y/Y Linked Quarter Mortgage banking fees $ 85 $ 165 $ 276 $ (80) $ (191) Service charges and fees 100 99 84 1 16 ■ Noninterest income dec
Slide 8: Noninterest expense
Noninterest expense(1) Well controlled expenses, down 2% QoQ Underlying, as applicable $ Highlights $s in millions 2Q21 1Q21 2Q20 Q/Q Y/Y Salaries & employee benefits $ 524 $ 548 $ 509 $ (24) $ 15 Linked Quarter Equipment & software 151 148 142 3 9 Outside services 133 132 119 1 14 ■ Underlying noni
Slide 9: Loans and leases
Loans and leases Average loans up 1% QoQ reflecting strength in retail with record originations Average loans and leases(1) Highlights $s in billions Linked Quarter $128.8 $124.9 $123.5 $122.8 $123.5 ■ Average loans up $643 million, or 1% – Retail up $867 million, or 1.4%, reflecting growth in $67.4
Slide 10: Average funding and cost of funds
Average funding and cost of funds Average deposits up 6% YoY and 3% QoQ; continue to drive down cost of funds Growing lower-cost deposits(1) Highlights $s in billions Linked Quarter $145.3 $146.6 $150.3 $141.6 $141.4 ■ Average deposits up 3% with growth in demand deposits, checking with interest and
Slide 11: Credit quality
Credit quality(1) Provision for credit losses, net charge-offs Highlights $s in millions ■ NCOs of $78 million decreased $80 million driven by improvement in commercial 0.70% ■ Nonaccrual loans decreased $229 million QoQ reflecting a $464 $428 0.61% 0.52% $116 million decrease in commercial, and a $
Slide 12: Allowance for credit losses
Allowance for credit losses Reserve release of $291 million; robust reserve coverage of 1.75% ex. PPP(3) Allowance for Credit Losses $2,372 $83 $2,081 $(78) $(37) $1,747 $(259) CECL Day 1 1Q21 New Loan Net Charge-offs Portfolio Economic/ 2Q21 Originations Changes (1) Qualitative Changes (2) Commenta
Slide 13: Capital and liquidity remain strong
Capital and liquidity remain strong Highlights $s in billions (period-end) 2Q20 3Q20 4Q20 1Q21 2Q21 ■ 2Q21 CET1 ratio of 10.3%, up from 10.1% in 1Q21, slightly Basel III basis (1)(2) above our target 9.75%-10.0% operating range Common equity tier 1 capital $ 14.2 $ 14.3 $ 14.6 $ 14.9 $ 15.3 – The ac
Slide 14: Business highlights and strategic priorities
Business highlights and strategic priorities Execution of TOP 6 ■ On track for total TOP 6 target pre-tax run-rate benefit of ~$400-$425 million by YE2021. Developing TOP 7 and Balance Sheet transformational efficiency opportunities Optimization ■ Evaluating originate-to-distribute opportunities to
Slide 15: Acquisition of HSBC East Coast Branches and Online Deposits
Acquisition of HSBC East Coast Branches and Online Deposits Compelling strategic benefits Pro-forma graphic footprint ■ Provides entry into attractive metro markets and enhances East Coast presence with 80 branches – NYC (66), Mid-Atlantic/DC (9), South FL (5) – ~800K retail customers, adding to exi
Slide 16: Committed to advancing ESG priorities
Committed to advancing ESG priorities Supporting Promoting Colleague Addressing Building in a Strengthening our Diversity, Equity Personal and Climate Change Thriving Economy Communities and Inclusion Professional Growth ■ $10 million provided ■ $4.8 billion in more ■ $1.065 billion ■ 2 point to add
Slide 17: 3Q21 outlook vs. 2Q21
3Q21 outlook vs. 2Q21 2Q21 Underlying(1) 3Q21 Underlying outlook(1) ■ NII up 2-3% Net interest ■ Average loans up slightly with spot loans up 2-3%; ■ $1,124 million income earning assets broadly stable ■ NIM up low-to-mid single digits Noninterest ■ $485 million ■ Up 2-4% income Noninterest ■ $980 m
Slide 18: Key messages
Key messages Citizens 2Q21 results reflect diversity across fee income businesses, expense control and excellent credit ■ Underlying PPNR of $629 million, down 5% from 1Q21 and 20% from 2Q20 – Largely reflects lower Mortgage revenue on further tightening of gain-on-sale margins despite strong origin
Slide 19: Appendix
Appendix
Slide 20: 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 ê5% Up modestly é4 bps $661 $629 $122.8 $123.5 1.44% 1.48% 1Q21 2Q21 1Q21 2Q21 1Q21 2Q21 Net income available to Return on average tangible Average deposits c
Slide 21: 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 ê20% ê4% é87 bps $128.8 $123.5 $790 1.48% $629 0.61% 2Q20 2Q21 2Q20 2Q21 2Q20 2Q21 Net income available to Average deposits Return on average tangible common
Slide 22: Mortgage banking
Mortgage banking Mortgage volumes remain strong; gain-on-sale margins lower from elevated levels Mortgage volumes and margin Production $s in billions ■ Record originations of $11.4 billion $11.3 $11.4 $11.1 – Expect 2H21 originations to approximate 1H21 level with shift towards more purchase volume
Slide 23: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type March 31, 2021 June 30, 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) $44,058 $742 1.68 %
Slide 24: Notable Items
Notable Items(1) First quarter and second quarter 2021, and second quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives as well as integration costs. These notable items have been excluded from reported results to better reflec
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 17 - 3Q21 outlook vs. 2Q21 1) See above note on non-GAAP financial measures. Notes on slide 18 - Key messages 1) See above general note d). 2) See above note on non-GAAP financial measures. Notes on slide 20 - 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 2Q21 Change 2Q21 1Q21 2Q20 1Q21 2Q20 $ % $ % Total revenue, Underlying: Total revenue (GAAP) A $1,609 $1,659 $1,750 ($50) (3%) ($141) (8%) Less: Notable items — — — — — — — Total r
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 2Q21 Change 2Q21 1Q21 2Q20 1Q21 2Q20 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,609 $1,659 $1,750 ($50) (2.96%) ($141) (8.00%) Less: Noninterest expense (GAAP) C
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 2Q21 Change 2Q21 1Q21 2Q20 1Q21 2Q20 $/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 2Q21 Change 2Q21 1Q21 2Q20 1Q21 2Q20 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $524 $548 $513 ($24) (4%) $11 2% Less: Notabl
Slide 31: Non-GAAP 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 2Q21 Change 2Q21 1Q21 4Q20 3Q20 2Q20 1Q21 2Q20 $/bps % $/bps % Total loans, excluding the impact of PPP loans: Total loans (GAAP) A $122,581 $12
Slide 32: Non-GAAP 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 2Q21 Change 2Q21 1Q21 2Q20 1Q21 2Q20 $/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.
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Citizens Financial Group — Q2 2021 Earnings Presentation on 6ix