Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q4 2020 Earnings Presentation
40 slides from Citizens Financial's earnings presentation, Jan 20, 2021
Slide 1: 4Q20 and 2020 Financial Results
4Q20 and 2020 Financial Results January 20, 2021
Slide 2: Forward-looking statements and use of non-GAAP financial measures
Forward-looking statements and use of non-GAAP financial measures Forward-Looking Statements. 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 wel
Slide 3: 4Q20 and Full Year 2020 GAAP financial summary
4Q20 and Full Year 2020 GAAP financial summary Full Year Q/Q Y/Y 2020 vs. 2019 $s in millions 4Q20 3Q20 4Q19 $/bps % $/bps % 2020 2019 $/bps % Net interest income $ 1,129 $ 1,137 $ 1,143 $ (8) (1)% $ (14) (1)% $ 4,586 $ 4,614 $ (28) (1)% Noninterest income 578 654 494 (76) (12) 84 17 2,319 1,877 442
Slide 4: 4Q20 and Full Year 2020 Underlying financial summary
4Q20 and Full Year 2020 Underlying financial summary(1) Full Year Q/Q Y/Y 2020 vs. 2019 $s in millions 4Q20 3Q20 4Q19 $/bps % $/bps % 2020 2019 $/bps % Net interest income $ 1,129 $1,137 $ 1,143 $ (8) (1) % $ (14) (1) % $ 4,586 $ 4,614 $ (28) (1) % Noninterest income 578 654 494 (76) (12) 84 17 2,31
Slide 5: Overview
Overview(1) Underlying net income of $1.1 billion, with EPS of $2.41 Record pre-provision profit up 12% on an Underlying basis Strong full-year Record noninterest income, up 24%, reflects the build out of our fee businesses with record results across 2020 results Mortgage, Capital Markets and
Slide 6: Net interest income
Net interest income Broadly stable NII with earning asset growth; NIM pressure from elevated cash balances NII and NIM Highlights $s in millions, except earning assets $162.4B $163.5B Linked Quarter $160.2B $148.9B $150.9B NII down 1% ─ Reflects lower commercial loan balances and $1,143 $1,160 $1,
Slide 7: Noninterest income
Noninterest income Investments in fee businesses driving 17% YoY growth $ $s in millions 4Q20 3Q20 4Q19 Q/Q Y/Y Highlights Mortgage banking fees $193 $287 $ 80 $ (94) $ 113 Linked Quarter Service charges and fees 104 97 128 7 (24) Noninterest income down 12% Capital markets fees 88 58 66 30 22 ─ M
Slide 8: Mortgage banking
Mortgage banking Well positioned to capitalize on current demand, grow share and perform well even as rates rise Mortgage banking fee growth Highlights Highlights $s in millions $915 Record FY20 mortgage banking fees, more than tripling year-over-year, reflecting $41 billion of originations and st
Slide 9: Noninterest expense
Noninterest expense(1) Expense discipline contributes to Underlying positive operating leverage of 2.1% YoY and 4.1% FY20 Underlying, as applicable $ Highlights $s in millions 4Q20 3Q20 4Q19 Q/Q Y/Y Linked Quarter Salaries & employee benefits $ 519 $ 511 $ 496 $ 8 $ 23 Equipment & software expense 1
Slide 10: Average loans and leases
Average loans and leases Average core loans up 4% YoY with commercial up 7% and retail up 1%; down 1% QoQ Average core loans and leases(1) Highlights $s in billions $127.7 $123.9 $122.5 Linked Quarter $117.7 $120.0 Average core loans down $1.4 billion, or 1% $57.1 $59.1 $67.0 $63.4 $61.1 ─ Commerc
Slide 11: Average funding and cost of funds
Average funding and cost of funds Strong deposit growth, with improving mix and pricing; interest-bearing deposit costs down to 27 bps Growing lower-cost deposits(1) Highlights $s in billions $141.6 $141.4 $145.3 Linked Quarter $125.7 $126.6 Average deposits up 3% driven by money market, demand 1.
Slide 12: Credit quality
Credit quality(1) Provision for credit losses, net charge-offs Highlights $s in millions NCOs down $29 million QoQ driven by commercial, with a $600 reduction in charge-offs in C&I and leasing largely offset by an 0.70% increase in CRE as a result of COVID-19 impacts $464 $428 4Q20 provision of
Slide 13: Strong capital & PPNR growth reflects diversified business model
Strong capital & PPNR growth reflects diversified business model as of Highlights $s in billions (period-end) 4Q19 1Q20 2Q20 3Q20 4Q20 Basel III basis (1)(2) CET1 ratio improved to 10.0%(1) QoQ, at the high end Common equity tier 1 capital $ 14.3 $ 14.0 $ 14.2 $ 14.3 $ 14.6 of our targeted 9.75-10
Slide 14: TOP programs a key driver of positive operating leverage since IPO
TOP programs a key driver of positive operating leverage since IPO Announced pre-tax benefits $s in millions ~$400-$425 ~$325 million announced July 2019 ─ ~85% efficiency/~15% revenue ~$100 million upsizing announced ~$200 ~$300 October 2020 ~$140 -$325 ~$115 ~$115 ~$105 ─ Efficiency-focused
Slide 15: Strategic priorities
Strategic priorities Consumer Commercial E2E digital transformation to E2E digital Enhancing Strengthen corporate finance increase sales and drive self- transformation coverage model advisory model with deep service interactions industry expertise across key Leverage Citizens Access® and verti
Slide 16: FY2021 outlook
FY2021 outlook Underlying 2020(1) 2021 expectations vs. Underlying 2020(1) Net interest $4,586 million net interest income Net interest income down slightly vs FY20 income, NIM 2.89% NIM full-year; 2.75% NIM in 4Q20 High single digit decrease in FY NIM Mid/high single digit spot loan growt
Slide 17: 1Q21 outlook vs. 4Q20
1Q21 outlook vs. 4Q20 We offer commentary on factors influencing key categories (1) (1) 4Q20 Underlying results 1Q21 Underlying outlook Net interest NII down slightly due to lower day count $1,129 million income Earning assets and NIM broadly stable Noninterest Down high single digits from 4
Slide 18: Key messages
Key messages(1) Citizens 2020 results demonstrate strength and resiliency of franchise and strong execution despite COVID-19 disruption ─ Record fee income with record results across Mortgage, Capital Markets and Wealth reflecting investments made to broaden capabilities and increase scale ─ Deliv
Slide 19: Appendix
Appendix ** Citizens Financial Group, Inc.” 19
Slide 20: Year-over-Year Underlying results
Year-over-Year Underlying results(1) Return on average Return total on average Pre-provision profit Average Loans tangible total assets tangible assets $s in millions $s in billions 7% $118.9 $123.5 4% 4 bps $737 $688 1.14% 1.10% 4Q19 4Q20 4Q19 4Q20 4Q19 4Q20 Net income available to Average de
Slide 21: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Pre-provision profit Average loans Return on average $s in millions $s in billions total tangible assets $834 $124.9 $123.5 12% 1% 1.10% 31 bps $737 0.79% 3Q20 4Q20 3Q20 4Q20 3Q20 4Q20 Net income available to Average deposits Return on average tangible comm
Slide 22: Full year Underlying results
Full year Underlying results(1) Pre-provision profit Average loans Return on average $s in millions $s in billions total tangible assets $3,039 12% $124.5 6% 49 bps $2,712 $117.9 1.16% 0.67% 2019 2020 2019 2020 2019 2020 Net income available to Average deposits Return on average tangible commo
Slide 23: Credit quality – monitoring delinquencies as forbearance programs wind down
Credit quality – monitoring delinquencies as forbearance programs wind down Retail loan portfolio June 30, 2020 In forbearance at: September 30, 2020 December 31, 2020 (1) Retail Broadly stable early-stage consumer % total Weighted Weighted delinquency trends $ billions 4Q20 CFG Avg FICO $ % $ % $
Slide 24: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type 4Q19 Probable January 1, 2020 September 30, 2020 December 31, 2020 Incurred Losses CECL Adoption CECL CECL % of Loans % of Loans % of Loans % of Loans % of Loans and leases % of Loans and leases Allowance for credit losses and leases and leas
Slide 25: Commercial credit – diversified portfolio with prudent credit discipline
Commercial credit – diversified portfolio with prudent credit discipline Highlights 3Q20 4Q20 Industry sectors % of Areas of % of Areas of Overall $s in billions Balance Total CFG Concern Balance Total CFG Concern Highly granular and diversified portfolio in terms of geography, Real Estate and Ren
Slide 26: Retail credit - diversified portfolio with prudent credit discipline
Retail credit - diversified portfolio with prudent credit discipline 3Q20 4Q20 % of Nonaccrual % of Nonaccrual Retail portfolio total WA total WA $in billions Balance CFG FICO $ % Balance CFG FICO $ % Residential mortgage $19.6 16 % ~785 $ 0.13 0.67 % $19.5 16 % ~785 $ 0.17 0.86 % Home equity 12.3 1
Slide 27: Reiterating medium-term financial targets
Reiterating medium-term financial targets(1) Medium-term financial targets ROTCE Efficiency Ratio CET1 Dividend payout ratio ~14-16% ~55% ~9.75-10.00% ~35-40% Economic assumptions Real GDP growth of ~4.5 to 5% for 2021; trending toward ~2.0% to 3.0% annually over the medium term Unemployment rat
Slide 28: FY2021 expense outlook
FY2021 expense outlook (1) Noninterest expense 2019-2020 $s in millions ~$130 ~$15 ~$80 ~$(140) Mortgage Procurement Engineering/ Cyber/Digital Operations $3,866 Branch $3,779 rationalization Commercial Contact expansion centers Organization simplification Point-of-sale Mortgage
Slide 29: Digital usage and engagement trends
Digital usage and engagement trends Digital adoption and engagement continues to accelerate within regional footprint 4Q20 YoY Consumer deposit transaction mix Digital Active Digital YoY Households Logins +7% +15% 42% -13 pts 55% Active Mobile Digital as % 30% +8 pts 22% Households of sales 23% 28%
Slide 30: Notable Items
Notable Items(1) Fourth and third quarter 2020 and fourth quarter 2019 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives. Fourth and third quarter 2020 and fourth quarter 2019 results also reflect notable items related to integration cos
Slide 31: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 31
Slide 32: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 32
Slide 33: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 33
Slide 34: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 34
Slide 35: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 35
Slide 36: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations 36
Slide 37: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations 37
Slide 38: 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 39: Notes continued
Notes continued Notes on slide 17 – 1Q21 outlook vs. 4Q20 1) See above note on non-GAAP financial measures. Notes on slide 18 – Key messages 1) See above note on non-GAAP financial measures. 2) See above general note e). Notes on slide 20 – Year-over-Year Underlying results 1) See above note on non-
Slide 40: 3« Citizens
3« Citizens Financial Group, Inc.”
Citizens Financial Group — Q4 2020 Earnings Presentation on 6ix