Citizens Financial Group, Inc. · NYSE:CFG

Citizens Financial — Q2 2015 Earnings Presentation

38 slides from Citizens Financial's earnings presentation, Jul 21, 2015

  1. Slide 1: 2Q15 Financial Results

    2Q15 Financial Results July 21, 2015

  2. Slide 2: Forward-looking statements

    Forward‐looking statements 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 “believes,” “expects,” “

  3. Slide 3: 2Q15 highlights

    2Q15 highlights Improving p g  GAAP diluted EPS of $0.35; Adjusted diluted EPS1 of $0.40, up 3% from 1Q15 and 8% from 2Q14 profitability and  Adjusted ROTCE1 of 6.7% vs. 6.3% in 2Q14 returns  Over 510 bps of Adjusted operating leverage1 YoY, and 130 bps QoQ  Generated 9% YoY average loan growth,

  4. Slide 4: Financial summary – GAAP

    Financial summary – GAAP 2Q15 change from Highlights $s in millions 2Q15 1Q15 2Q14 1Q15 2Q14 Linked Li k d quarter: $ % $ %  Net income down $19 million driven by a Net interest income $ 840 $ 836 $ 833 $ 4 — % $ 7 1 % $19 million increase in provision expense and Noninterest income 360 347 640 13

  5. Slide 5: Restructuring charges and special items

    Restructuring charges and special items GAAP results included restructuring charges and special items related to enhancing efficiencies and improving processes across the organization and separation from The Royal Bank of Scotland Group plc (“RBS”). 1 Restructuring charges and special items 2Q15 cha

  6. Slide 6: Adjusted 2Q15 financial summary excluding restructuring charges and special items

    Adjusted 2Q15 financial summary ‐ excluding restructuring charges and special items1 Highlights Excluding the estimated Linked q quarter: 2Q15 change from i impact off $s in millions 2Q15 1Q15 2Q14 1Q15 2Q14 Chicago  Adjusted net income remained stable reflecting $ % $ % Divestiture6 revenue growth

  7. Slide 7: Net interest income

    Net interest income $s in millions, except earning Net interest income Highlights assets $119B $121B $123B Linked quarter: $116B $117B  NII up slightly ─ Benefit of $1.7 billion increase in average loans and $8201 leases and an additional day in the quarter $833 $820 $840 $836 $840 ─ Offset Off t b

  8. Slide 8: Net interest margin

    Net interest margin NIM% walk 1Q15 to 2Q15 (0.03%) (0.01%) (0.01%) 2 77% 2.77% 2.72% 1Q15 NIM% Loan yields, Investment Deposit costs 2Q15 NIM% mix, & fees premium amortization// other NIM% walk 2Q14 to 2Q15 0.04% (0.08%) (0.05%) (0.04%) (0.02%) 2.87% 2.87% 2.72% 2.72% 2Q14 NIM% Pay‐fixed Loan yields

  9. Slide 9: Adjusted noninterest income

    Adjusted noninterest income2 $s in millions 2Q15 change from Highlights 2Q15 1Q15 2Q14 1Q15 2Q14 Linked quarter: $ % $ %  Noninterest income up $13 million on Service charges and fees $ 139 $ 135 $ 147 $ 4 3 % $ (8) (5) % strength in capital markets, card fees, Card fees 60 52 61 8 15 (1) (2) trust

  10. Slide 10: Adjusted noninterest expense

    Adjusted noninterest expense – excluding. restructuring charges and special items1 2Q15 change from Highlights $ iin millions $s illi 2Q15 1Q15 2Q14 1Q15 2Q14 Linked quarter: $ % $ % Adjusted salaries and benefits 1 $ 405 $ 420 $ 424 $ (15) (4) % $ (19) (4) %  Adjusted noninterest expense remained

  11. Slide 11: Consolidated 2Q15 average balance sheet

    Consolidated 2Q15 average balance sheet 2Q15 change from Highlights $s in billions 2Q15 1Q15 2Q14 1Q15 2Q14 Linked q quarter: $ % $ %  Total earning assets up 2% Investments and interest bearing deposits $ 27.1 $ 27.0 $ 26.8 $ 0.1 — % $ 0.3 1 % ─ Commercial loans up $1.2 billion, given Total commer

  12. Slide 12: Consumer Banking average loans and leases

    Consumer Banking average loans and leases $s in billions Highlights Average loans and leases Li k d quarter: Linked  Average loans increased $680 million, or 1% $50.1B $50.7B $49.2B $47.2B $47.7B $2.3  Net average impact of loan purchases and sales of $207 $2.6 $2.5 $2.7 $3.1 $3.1 million in 2Q15;

  13. Slide 13: Commercial Banking average loans and leases

    Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $40.2B $41.5B $38.9B Linked quarter: $37.4B $37.8B $3.0 $2.6 $2.5  Average loans up $1.2 billion, or 3%, on strength in $2.2 $2.2 Commercial Real Estate,, Middle Market,, Corporate p $7.4 $ $7.7 $7.2 Fina

  14. Slide 14: Average funding and cost of funds

    Average funding and cost of funds $s in billions Average interest‐bearing liabilities1 Highlights Linked quarter: $85.4B $86.9B $80.8B $82.5B  Average interest‐bearing deposits increased $3.9 $3.9 $2.8 $2.2 billion, or 3%, with growth in nearly all major $74.8B $2.0 $7.0 $ $6.5 $ $6.7 $6 1 $6.1 cat

  15. Slide 15: Consumer: Summary of progress on strategic initiatives

    Summary of progress on strategic initiatives 2Q15 2015 Initiative a e Commentary o e ay SStatus Outlook O l k 1 2Q15 YoY checking household growth of 2%; new customer cross‐sell Reenergize household growth rate improved to 3.28 vs. 2.98 in 2Q14 LOs up 86, or 23%, from 2Q14; Origination volume up 68%

  16. Slide 16: Strong credit quality trends continue

    Strong credit quality trends continue $s in millions Highlights Net charge‐offs (recoveries)  O Overall e a ccredit ed t qua quality ty remains e a s st strong. o g NPL’ss dec declined ed by $86 million o oor 8% QoQ $88 $68 $80 $54 $78 and 13% YoY $9 $6 $11 $7 $3  Net charge‐offs were $78 million,

  17. Slide 17: Capital and liquidity remain strong

    Capital and liquidity remain strong as of Highlights $s in billions (period‐end) 2Q14 3Q14 4Q14 1Q15 2Q15 1,2  Capital levels remain above regional peers Basel I/III transitional basis Basel I Basel III Common equity tier 1 capital $ 13.4 $ 13.3 $ 13.2 $ 13.4 $ 13.3  2Q15 Basel III common equity t

  18. Slide 18: Delivered for all stakeholders in 2Q15

    Delivered for all stakeholders in 2Q15  Changed 200 Charter One branches in Michigan and Ohio to Citizens Bank to unify and simplify brand Customers  Ranked as one of the 10 most reputable U.S. banks in annual American Banker reputation survey  Launched an intensive development program for top le

  19. Slide 19: 3Q15 outlook

    3Q15 outlook 3Q15 expectations vs. 2Q15 Net interest  Average loan growth rate of ~1.5% income, net  Net interest margin broadly stable, may have bottomed interest margin Operating leverage,  Positive operating leverage expected to continue efficiency ratio  Modest expense growth due to investme

  20. Slide 20: Incremental revenue and efficiency initiatives (Top II)

    Incremental revenue and efficiency initiatives (Top II) 2016 Targeted P t Benefit Pre‐tax B fit ($s in millions) Category Name Description Revenue Expense Operations transformation Refine operating model to simplify $25‐$30 organization, i i reduce d costs, improve i service i levels and enhance con

  21. Slide 21: Impact on guidance

    Impact on guidance  Broadly reaffirm overall FY 2015 guidance provided on 4Q14 earnings call ─ Expectation is for lower revenues offset by better expenses, credit provision ─ Main headwind from rates; now assuming only one rate hike at year‐end ─ Expect Top II initiatives to provide ~$25 million pr

  22. Slide 22: Key messages

    Key messages  Continue to execute well on our broad agenda ─ Good momentum in both Consumer and Commercial  Have developed new initiatives to continue our upward financial trajectory  Asset sensitivity continues to be stable, await benefit from higher rates  Asset quality, capital ratios, and li

  23. Slide 23: Appendix

    Appendix %£ Citizens Financial Group, Inc.” 22

  24. Slide 24: Quarter over quarter results

    Quarter over quarter results Adjusted pre‐provision profit1 Period‐end loans2 Adjusted return on average $s in millions $s in billions ibl assets1 tangible $399  13% $96.5  9%  1 bps $88.8 0.7% 0.7% $352 2Q14 2Q15 2Q14 2Q15 2Q14 2Q15 Adjusted net income1 Period‐end deposits2 Adjusted return on av

  25. Slide 25: Linked quarter results

    Linked quarter results Adjusted pre‐provision profit1 Basel III common equity Adjusted return on average $s in millions tier i 1 capital i 2 i l ratio ibl assets1 tangible $399  4% ~40 bps  2 bps $383 12.2% 11.8% 0.7% 0.7% 1Q15 2Q15 1Q15 2Q15 1Q15 2Q15 Adjusted net income1 Tier 1 leverage ratio2

  26. Slide 26: Consumer Banking segment

    Consumer Banking segment Excluding the 2Q15 change from estimated impact of Highlights $s in millions 2Q15 1Q15 2Q14 1Q15 2Q14 Chicago g Divestiture4 Linked quarter: $ % $ % Net interest income $ 544 $ 533 $ 546 $ 11 2 % $ (2) — %  3%  Net income up $5 million Noninterest income 230 219 236 11 5 (

  27. Slide 27: Commercial Banking segment

    Commercial Banking segment 2Q15 change from Highlights $s in millions 2Q15 1Q15 2Q14 1Q15 2Q14 Linked q quarter: $ % $ % Net interest income $ 286 $ 276 $ 264 $ 10 4 % $ 22 8 %  Commercial Banking net income decreased $12 million Noninterest income 108 100 107 8 8 1 1  Total revenue up $18 million

  28. Slide 28: Other

    Other 2Q15 change from $s in millions $ 2Q15 Q 1Q15 Q 2Q14 Q 1Q15 Q 2Q14 Q $ % $ % Net interest income $ 10 $ 27 $ 23 $ (17) (63) % $ (13) (57) % Noninterest income 22 28 297 (6) (21) (275) (93) Total revenue 32 55 320 (23) (42) (288) (90) Noninterest expense 47 41 136 6 15 (89) (65) Pre‐provision p

  29. Slide 29: Restructuring charges and special items

    Restructuring charges and special items GAAP results included restructuring charges and special items related to enhancing efficiencies and improving processes across the organization and separation from the Royal Bank of Scotland Group plc (“RBS”). as of and for the three months ended Restructuring

  30. Slide 30: Loan Reconciliation

    Loan Reconciliation Average balances $s in millions 2Q15 change from 2Q14 3Q14 4Q14 1Q15 2Q15 1Q15 2Q14 Consumer Banking Segment $ 47,368 $ 47,848 $ 49,351 $ 50,260 $ 51,024 $ 764 2 % $ 3,656 8 % Add: Non‐core loans 3,066 2,932 2,801 2,667 2,517 (150) (6) (549) (18) (1) Retail loans in Commercial Ba

  31. Slide 31: Non-core home equity portfolio serviced by others

    Non‐core home equity portfolio serviced by others (SBO)1 Non‐core period‐end loans $ $3.4B $3.2B $3.0B $2.9B $2.7B SBO balances by LTV2 SBO balances by FICO2,3 120+ < 70 < 620 3 760+ 12% 15% 100‐119 26% 2Q14 3Q14 4Q14 1Q15 2Q15 31% Retail Commercial SBO 16% 70‐79 17% 620‐679 SBO balances and charge‐

  32. Slide 32: Non-GAAP Financial Measures

    Non‐GAAP Financial Measures This document contains non‐GAAP financial measures. The table below presents reconciliations of certain non‐GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are usually included, where applicable, in the financial results pres

  33. Slide 33: Non-GAAP Reconciliation Table

    Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE SIX MONTHS ENDED QUARTERLY TRENDS JUNE 30 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014 Noninterest income, excluding special items: Noninterest income (GAAP) A $360 $347 $339 $341 $6

  34. Slide 34: Non-GAAP Reconciliation Table

    Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE SIX MONTHS ENDED QUARTERLY TRENDS JUNE 30 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014 Efficiency ratio and efficiency ratio, excluding restructuring charges and special items: Net i

  35. Slide 35: Non-GAAP Reconciliation Table

    Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) FOR THE SIX MONTHS ENDED $s in millions, except per share data QUARTERLY TRENDS JUNE 30 2Q15 1Q15 4Q14 3Q14 2Q14 2015 2014 Outside services, excluding restructuring charges and special items: Outside services (GAAP) Y

  36. Slide 36: Non-GAAP Reconciliation Table – Segments

    Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions T hre e M o nt hs E nde d J une 3 0 , T hre e M o nt hs E nde d M a rc h 3 1, T hre e M o nt hs E nde d D e c e m be r 3 1, 2 0 15 2 0 15 2 0 14 C o ns um e r C o m m e rc ia l C o ns um e r C o m m e rc ia l C o ns um e

  37. Slide 37: Non-GAAP Reconciliation Table – Segments

    Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions FOR THE SIX MONTHS ENDED JUNE 30, 2015 2014 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income (loss) (GAAP) A $127 $282 ($10) $399 $76 $282 $121 $479

  38. Slide 38: Citizens Financial Group, Inc.

    3« Citizens Financial Group, Inc.”

Citizens Financial Group — Q2 2015 Earnings Presentation on 6ix