Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2023 Earnings Presentation
44 slides from Citizens Financial's earnings presentation, Apr 19, 2023
Slide 1: 1Q23 Financial Results
1Q23 Financial Results April 19, 2023
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 the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement. These state
Slide 3: 1Q23 GAAP financial summary
1Q23 GAAP financial summary Q/Q Y/Y $s in millions 1Q23 4Q22 1Q22 $/bps % $/bps % Net interest income $ 1,643 $ 1,695 $ 1,147 $ (52) (3) % $ 496 43 % Noninterest income 485 505 498 (20) (4) (13) (3) Total revenue 2,128 2,200 1,645 (72) (3) 483 29 Noninterest Expense 1,296 1,240 1,106 56 5 190 17 Pre
Slide 4: 1Q23 Underlying financial summary
1Q23 Underlying financial summary(1) Q/Q Y/Y $s in millions 1Q23 $/bps % $/bps % Net interest income $ 1,643 $ (52) (3)% $ 496 43% Noninterest income 485 (20) (4) (13) (3) Total revenue 2,128 (72) (3) 483 29 Noninterest expense 1,230 33 3 172 16 Pre-provision profit 898 (105) (10) 311 53 Provision (
Slide 5: Overview
Overview(1) 1Q23: Navigating well in a dynamic environment – Underlying EPS of $1.10 and ROTCE of 15.8% – Underlying PPNR of $898 million, reflecting seasonality ▪ NII down 3% QoQ given lower day count and slightly lower interest-earning assets; stable net interest margin of 3.30% ▪ Fees down 4% QoQ
Slide 6: Current areas of interest in the banking industry
Current areas of interest in the banking industry ■ Citizens has one of the highest capital levels in our regional bank peer group Strength of ■ CET1 ratio of 10.0%(1); 8.7% including unrealized losses on AFS & HTM securities AOCI capital base ■ Tangible common equity ratio of 6.6%, up ~38 bps QoQ ■
Slide 7: Strong capital position
Strong capital position(1) CET1 Ratio(2) TCE ratio Peer 1 10.4% Peer 1 7.6% CFG (1Q23) 10.0% CFG (1Q23) 6.6% CFG (4Q22) 10.0% CFG (4Q22) 6.3% Peer 2 10.0% Peer 2 5.6% Peer 3 9.6% Peer 3 5.6% Peer 4 9.4% Peer 4 5.3% Peer 5 9.3% Peer 5 5.1% Peer 6 9.1% Peer 6 4.9% Peer 7 9.1% Peer 7 4.6% Peer 8 9.0% P
Slide 8: Highly diversified and retail-oriented deposit base
Highly diversified and retail-oriented deposit base Business Mix $172B Deposits Product Mix (As of 3/31/23) Wealth 1% Business Term Banking 7% Citizens 14% Access™ Commercial Savings Demand 5% 26% 13% 26% Citizens Access™ Savings 4% Treasury/ Checking Other with interest Branch 7% 21% Money Market D
Slide 9: Period-end deposit performance since mid-2022 is in line with industry
Period-end deposit performance since mid-2022 is in line with industry Cumulative change in deposits since 6/30/22 2% ISBC acquisition 1% 2Q22 0% (1)% (2)% (3)% (4)% (5)% 2Q22 3Q22 4Q22 1Q23 CFG Peer Average H8 Data* Commentary ■ The 4.7% decrease QoQ in spot deposits was driven by seasonality and r
Slide 10: Deposit growth strategies
Deposit growth strategies Consumer Commercial ■ Continuing to accelerate efforts to drive strong relative ■ Attractive opportunities in the NY Metro market post- performance to peers in low-cost deposit categories conversion of Investors branches over the short and longer term horizon ■ Relationship
Slide 11: Commercial Real Estate sector concerns
Commercial Real Estate sector concerns CRE by property type(1) (As of 3/31/2023) Balance % of total NPL ACL/NPL ACL Property Type NPL % ACL $ ($ in billions) CFG loans ($ in millions) Ratio Coverage Multifamily + Co-op $ 10.5 6.8 % $ 21 0.2 % $ 88 418 % 0.8 % Office - credit-tenant/life 2.2 1.4 — —
Slide 12: Commercial Real Estate - $6.3B Office Portfolio: well diversified
Commercial Real Estate - $6.3B Office Portfolio: well diversified Property type $4.1B General office breakdown Credit tenant $1.5B 25% Class B 37% Class A General office 57% $4.1B 11% Life sciences 64% Class C $0.7B 6% Central Business Suburban Geography 68% District 32% TX VA Mid-Atlantic 8% 8% 31%
Slide 13: Net interest income
Net interest income 3.30% NIM stable QoQ NII and NIM Linked Quarter $s in millions, except earning assets $198.7B $203.6B $204.5B $202.6B ■ NII down 3% given lower day count (-$29MM) and slightly lower interest-earning assets (-$14MM) $1,665 $1,695 $1,643 – NIM of 3.30% was stable, as higher earning
Slide 14: Noninterest income
Noninterest income(1) Solid fee performance in spite of seasonality and a challenging market environment $ Linked Quarter $s in millions 1Q23 4Q22 1Q22 Q/Q Y/Y ■ Noninterest income decreased 4% Service charges and fees $ 100 $ 105 $ 98 $ (5) $ 2 – Service charges and fees decreased $5 million, refle
Slide 15: Noninterest expense
Noninterest expense(1) Disciplined on expenses while prioritizing key strategic investments Underlying, as applicable $ Linked Quarter $s in millions 1Q23 4Q22 1Q22 Q/Q Y/Y ■ Underlying noninterest expense up 2.8% Salaries & employee benefits $ 642 $ 618 $ 588 $ 24 $ 54 Outside services 149 153 134
Slide 16: Loans and leases
Loans and leases(1) Period-end loans down slightly reflecting balance sheet optimization Average loans and leases(2) Linked Quarter $s in billions $153.8 $156.9 $157.1 $156.5 ■ Average loans down slightly $129.2 $21.8 – Commercial broadly stable $0.7 – Retail down slightly given planned run off in a
Slide 17: Average funding and cost of funds
Average funding and cost of funds(1) Deposits broadly stable during March disruption 1Q23 Average deposits Linked Quarter $s in billions $176.4 $177.6 $179.0 ■ Average deposits down $4.7 billion, or 2.6%; Period-end $174.4 $155.1 deposits down $8.5 billion, or 4.7%, driven by seasonal and rate-relat
Slide 18: Credit quality overview
Credit quality overview Credit provision expense (benefit); Highlights net charge-offs $s in millions ■ NCOs of $133 million, or 34 bps of average loans and leases, up 12 bps QoQ 0.34% 0.19% 0.19% 0.22% ■ Nonaccrual loans increased 4 bps QoQ to 64 bps of total 0.13% $168 loans driven by an increase
Slide 19: Allowance for credit losses
Allowance for credit losses Allowance for credit losses Commentary $s in millions 4Q22 1Q23 ■ The increase in the ACL reserve coverage to % 1.47% primarily reflects higher reserves against ACL % Coverage ACL Coverage CRE exposures Retail $ 973 1.31 % $ 949 1.29 % ■ The key macroeconomic assumptions
Slide 20: Capital remains strong
Capital remains strong $s in billions (period-end) 1Q22 2Q22 3Q22 4Q22 1Q23 Highlights (1)(2) Basel III basis ■ 1Q23 CET1 ratio of 10.0%(1) compares with 10.0% in Common equity tier 1 capital $ 15.6 $ 17.9 $ 18.3 $ 18.6 $ 18.4 4Q22 Risk-weighted assets $161.9 $187.7 $187.2 $185.2 $183.2 ■ TBV/share
Slide 21: Entry into New York Metro progressing well
Entry into New York Metro progressing well Capitalizing on opportunities to capture market share in NYC/NJ Successfully executed Strong early Focus on conversions momentum accelerating growth Executing initiatives to build our Top 10 market share(1) with ~200 Sales volumes beating expectations brand
Slide 22: Transforming how we operate the bank and deliver for customers
Transforming how we operate the bank and deliver for customers TOP program benefits TOP 8 program $s in millions ■ TOP 8 underway and progressing well ~$425 ■ In light of the environment, looking for opportunities to augment the program ■ Further efficiencies under consideration: ~$200 – Further sim
Slide 23: 2Q23 outlook vs. 1Q23
2Q23 outlook vs. 1Q23 1Q23 2Q23 Underlying(1) Underlying outlook Net interest income $1,643MM Down ~3% Noninterest income $485MM Up mid to high single digits Noninterest expense $1,230MM Stable to down slightly Net charge-off ratio 34 bps Mid 30's basis points CET1 ratio(2) 10.0% Above 10%; assume s
Slide 24: Updates to FY2023 outlook vs. 2022
Updates to FY2023 outlook vs. 2022 2022 Original January 2023 Guide April 2023 Update Underlying(1) Net interest income $6,012MM Up 11-14% Up 5-7% Noninterest income $2,040MM Up 7-9% Up mid-single digits Up ~7%; up 3.5-4% ex HSBC/ISBC full-year acquisition impact and Noninterest expense $4,630MM FDI
Slide 25: Navigating well through a dynamic environment
Navigating well through a dynamic environment Citizens operates from a position of capital strength – CET1 ratio of 10.0%(1), at upper end of target range – CET1 ratio and TCE ratio including impact from net unrealized losses on debt securities in AOCI are among the strongest in the peer group – Rep
Slide 26: Appendix
Appendix
Slide 27: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets ê19 bps ê0.4% $179.0 $174.4 ê3% $157.1 $156.5 1.25% 1.06% 4Q22 1Q23 4Q22 1Q23 4Q22 1Q23 Pre-provision profit Net income available to Return on average tangible $s
Slide 28: Year-over-year Underlying results
Year-over-year Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets é21% é12.4% 0 bps $174.4 $156.5 $155.1 1.06% 1.06% $129.2 1Q22 1Q23 1Q22 1Q23 1Q22 1Q23 Net income available to Return on average tangible Pre-provision profit $s
Slide 29: Stabilizing and protecting NII and NIM
Stabilizing and protecting NII and NIM Cash flow hedges are the primary tool to manage interest rate exposure Receive fixed cash flow swaps - average notional balances $ billions at 3/31/23 Remaining 3 quarters W.A. receive fixed 4.3% 3.2% 3.1% 3.2% 3.2% 2.8% rate at 3/31/23(1) ALM hedging update ■
Slide 30: $80.9B Commercial credit portfolio
$80.9B Commercial credit portfolio Diverse and granular portfolio Commercial portfolio risk ratings(2) $s in billions % of Balances total CFG ($ in billions) C&I $57.5 $82.2 $80.9 Finance and Insurance B- and lower 3% 4% 6% Capital call facilities $ 6.5 4% B+ to B 14% 14% 15% Other Finance and Insur
Slide 31: $73.8B Retail credit portfolio
$73.8B Retail credit portfolio Retail loans(1) High quality, diverse portfolio Other retail ■ Mortgage – FICO ~785 Education - 7% Residential – Weighted-average LTV of ~55% refinance mortgages ■ Home equity – FICO ~765 13% – ~42% secured by 1st lien Education - 41% in school 4% – ~97% CLTV less than
Slide 32: Delinquency by product type
Delinquency by product type December 31, 2022 (%) March 31, 2023 (%) Days Past Due and Accruing Days Past Due and Accruing Current 30-59 60-89 90+ Nonaccrual Current 30-59 60-89 90+ Nonaccrual Commercial and industrial 99.14 % 0.29 % 0.05 % 0.04 % 0.48 % 99.12 % 0.24 % 0.01 % 0.04 % 0.59 % Commercia
Slide 33: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type December 31, 2022 March 31, 2023 Loans and Allowance Coverage Loans and Allowance Coverage Leases Leases $s in millions Allowance for Loans and Lease Losses Commercial and industrial(1) $51,836 $581 1.12 % $50,450 $601 1.19 % Commercial real
Slide 34: Notable items
Notable items(1) Quarterly results reflect notable items primarily related to integration costs associated with the acquisitions of HSBC, ISBC and JMP Group LLC, as well as TOP revenue and efficiency initiatives. First quarter 2022 results include a notable item representing the day-one CECL provisi
Slide 35: Notes
Notes Notes on Non-GAAP Financial Measures See important information on our use of Non-GAAP Financial Measures at the beginning this presentation and reconciliations to GAAP financial measures at the end of this presentation. Non-GAAP measures are herein defined as Underlying results and excluding H
Slide 36: Notes continued
Notes continued Notes on slide 20 - Capital remains strong 1) See general note d). 2) For regulatory capital purposes, we have elected to delay the estimated impact of CECL on regulatory capital for a two-year period ended December 31,2021, followed by a three-year transition period ending December
Slide 37: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS FULL YEAR 1Q23 Change 1Q23 4Q22 1Q22 4Q22 1Q22 2022 $ % $ % Noninterest income, Underlying: Noninterest income (GAAP) A $485 $505 $498 ($20) (4%) ($13) (3%) $2,009 Less: Notable it
Slide 38: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q23 Change 1Q23 4Q22 1Q22 4Q22 1Q22 $/bps % $/bps % Operating leverage: Total revenue (GAAP) C $2,128 $2,200 $1,645 ($72) (3.28%) $483 29.39% Less: Noninterest expense (GAAP) E 1,
Slide 39: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q23 Change 1Q23 4Q22 1Q22 4Q22 1Q22 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) Q
Slide 40: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q23 Change 1Q23 4Q22 1Q22 4Q22 1Q22 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $658 $633 $594 $25 4% $64 11% Less: Notable i
Slide 41: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q22 2Q22 Noninterest income, Underlying: Noninterest income (GAAP) A $512 $494 Less: Notable items — (31) Noninterest income, Underlying (non-GAAP) $512 $525 Total revenue, Underl
Slide 42: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q23 Change 1Q23 4Q22 4Q22 $/bps % CET1 Ratio Adjusted for AFS & HTM unrealized losses CET1 capital $ 18,370 $ 18,574 $ (204) (1)% Less: AFS securities - AOCI 1,516 1,840 (324) (18
Slide 43: Non-GAAP reconciliations - excluding HSBC & ISBC Acquisitions
Non-GAAP financial measures and reconciliations - excluding the impact of HSBC & ISBC Acquisitions $s in millions, except ratio data QUARTERLY TRENDS 1Q23 Change 1Q23 4Q22 1Q22 4Q22 1Q22 $/bps % $/bps % Noninterest expense, Underlying excluding HSBC & ISBC: Noninterest expense (GAAP) A $1,296 $1,240
Slide 44: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q1 2023 Earnings Presentation on 6ix