Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Investor Presentation (March 2006)
71 slides from Citizens Financial's investor presentation, March 2006
Slide 1: 2006 Analyst Visit Citizens Financial Group
2006 Analyst Visit Citizens Financial Group
Slide 2: 2006 Analyst Visit Citizens Financial Group
2006 Analyst Visit Citizens Financial Group
Slide 3: Forward looking statements disclaimer
This presentation may contain forward looking statements, including such statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements concern or may affect future matters, such as the Group's economic results,
Slide 4: Agenda
Agenda I. Larry Fish Chairman & CEO Overview II. Bob Mahoney Vice-Chairman Retail Banking III. Steve Steinour President Commercial Banking IV. Mark Formica Manufacturing Vice-Chairman National Consumer Businesses V. Larry Fish Conclusion
Slide 5: Overview
Overview Larry Fish Chairman & CEO Citizens Financial Group
Slide 6: Citizens Bank Branch Network
Citizens Bank Branch Network 1992 2
Slide 7: Second Largest Bank in New England
Second Largest Bank in New England 2000 3
Slide 8: Acquisition of Mellon Regional Franchise
Acquisition of Mellon Regional Franchise 2001 4
Slide 9: Acquisition of Charter One
Acquisition of Charter One 2004 5
Slide 10: Pre-tax Contribution Growth
Pre-tax Contribution Growth $3,000 $2,867 $2,750 Compounded Annual Growth – 30% $2,500 $2,250 $1,959 $2,000 (In Millions) $1,750 $1,500 $1,414 $1,250 $1,152 $1,000 $722 $750 $535 $500 $362 $413 $417 $306 $250 $180 $45 $36 $55 $121 $26 $21 $0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 200
Slide 11: Scale
Scale US Ranking Assets * #8 Deposits * #8 Total Branches #7 In-store Branches #2 ATMs #9 Indirect Auto Outstandings #2 Home Equity Outstandings #6 Small Business Lending (SBA) #2 Merchant Acquirer #10 * Rank of #6 if RBS US assets and US deposits are included 7
Slide 12: Diversified Income
Diversified Income 2005 Income $5,940m Other 14% Retail banking 39% Commercial banking 28% Consumer lending 19% Retail banking includes deposits and fees; commercial banking includes loans, deposits and fees 8
Slide 13: Low Risk
Low Risk • Citizens is focused on retail, small business and mid-market banking • Loan portfolio is conservative and largely secured • Balance sheet liquidity / core funding 9
Slide 14: Low Risk: Loans and Advances to Customers
Low Risk Loan and Advances to Customers As of 31/12/05 $bn % Secured Consumer loans 75.4 72% Above 90% Commercial loans 29.2 28% About 90% Total 104.6 100% Above 90% 10
Slide 15: Low Risk: High Quality Deposit Base
Low Risk High Quality Deposit Base As of 31/12/05 $bn Checking with Interest 12.8 Liquid Savings 34.9 Term & Time 36.9 Customer Repos 6.2 Demand Deposits 15.3 Other 0.2 Total 106.3 11
Slide 16: Citizens 2005 Results
Citizens 2005 Results 2005 Change $m % Total income 5,940 +42% Ex acquisitions, contribution up 10% Direct expenses 2,834 +42% Charter One intergration on plan Impairment losses 239 +12% Good progress in cards Contribution 2,867 +46% Good underlying volume growth Yield curve pressure Sound credit qu
Slide 17: Citizens Credo
Citizens Credo • Customers: Treat the customer the way you would love to be treated all the time • Colleagues: Do what it takes to make our company the best place in the world to work • Community: Show that you care deeply about the community. Conduct yourself ethically at all times 13
Slide 18: Super Community Delivery
Super Community Delivery • Compete with largest banks Products Systems Marketing • Compete with smallest banks Service Community involvement 14
Slide 19: Operating Structure
Operating Structure • Local service delivery with geographic organization structure “If it touches the customer, it is done locally” Local boards and local management • Centralized operations, technology, risk management and finance • “If it is a back office function, it is handled centrally” 15
Slide 20: Executive Management Team
Executive Management Team Years at Citizens Larry Fish Chairman & Chief Executive Officer 14 Bob Mahoney Vice Chairman - New England Banking 12 Steve Steinour President - Mid-Atlantic & Charter One Banking 13 Mark Formica Vice Chairman - Retail Delivery & Support 13 Jim Connolly Vice Chairman - Corp
Slide 21: Summary
Summary • Consistent growth – organically and through acquisitions • Low risk philosophy • Simple operating model • Credo 17
Slide 22: Bob Mahoney, Vice Chairman
Bob Mahoney Vice Chairman Citizens Financial Group
Slide 23: Citizens Retail Banking
Citizens Retail Banking • Profile • Business Model • Performance 2
Slide 24: Citizens Retail Banking: Profile
Citizens Retail Banking: Profile Total Branches: 1,635 • Traditional: 1,115 • In-store: 520 ATMs: 2,827 Customers • Retail Households: 6 million • Small Businesses: 362,000 • Online Banking: 1.7 million Calls Per Day: 3.2 million Debit Cards: 3 million 39% of Citizens Income 3
Slide 25: Citizens Retail Banking: Profile
Citizens Retail Banking: Profile Total Deposits in CFG Market Market $bn Share CFG Rank Massachusetts $147 16.8% 2 Rhode Island $20 47.1% 1 New Hampshire $21 29.7% 1 Connecticut $77 4.2% 7 Pennsylvania $218 10.8% 3 Philadelphia MSA $145 9.3% 3 Pittsburgh MSA $51 12.8% 3 Delaware $17 6.9% 5 New Jerse
Slide 26: Citizens Retail Banking: Profile
Citizens Retail Banking: Profile Total Deposits in CFG Market Market $bn Share CFG Rank Ohio $201 4.2% 7 Cleveland MSA $65 8.2% 3 Illinois $288 2.2% 7 Chicago MSA $231 2.8% 6 Michigan $139 3.7% 7 Detroit MSA $77 6.4% 6 Upstate New York * $145 6.2% 6 Indiana $85 0.4% - Vermont $10 9.8% 3 Source: SNL
Slide 27: Citizens Retail Banking: Business Model
Citizens Retail Banking: Business Model • Sales & Service Focused • Highly Incented • Numbers Driven • Strongly Branded 6
Slide 28: Sales & Service Focused: Recruitment
Citizens Retail Banking: Business Model Sales & Service Focused Recruitment 7
Slide 29: Sales & Service Focused: Investment in In-Store
Citizens Retail Banking: Business Model Sales & Service Focused Investment in In-Store 8
Slide 30: Sales & Service Focused – Small Business
Citizens Retail Banking: Business Model Sales & Service Focused – Small Business • Deposit Focused • 370 Business Banking Officers • 350,000 In-person Business Visits Per Year • 2,000 New Business Customers Per Week 9
Slide 31: Sales & Service Focused
Citizens Retail Banking: Business Model Sales & Service Focused • 50,000 Customer Surveys Per Month • 30 Impressions Per Branch, Per Month • Credo Moments 10
Slide 32: Highly Incented
Citizens Retail Banking: Business Model Highly Incented Incentive % of Bankers base pay Retail 40% Small Business 65% • 20% of Retail Bankers earn more than $85K • 20% of Small Business Bankers New Car Leases for earn more than $100K Top Sales Performers! 11
Slide 33: Numbers Driven: Weekly Sales Tracking
Citizens Retail Banking: Business Model Numbers Driven Weekly Sales Tracking Week Ended March 3, 2006 Personal Checking Business Checking Pers Savings/MM CDs Bus Savings/MM Equity Lines (Apps) Variance to: Variance to: Variance to: Variance to: Variance to: Variance to: Current Goal % Current Goal %
Slide 34: Numbers Driven: Weekly Sales Tracking
Citizens Retail Banking: Business Model Numbers Driven Weekly Sales Tracking Week Ended March 3, 2006 Personal Checking Business Checking Pers Savings/MM CDs Bus Savings/MM Equity Lines (Apps) Variance to: Variance to: Variance to: Variance to: Variance to: Variance to: Current Goal % Current Goal %
Slide 35: Strongly Branded
Citizens Retail Banking: Business Model Strongly Branded 14
Slide 36: Retail Banking Performance: Unaided Brand Awareness
Citizens Retail Banking: Performance Unaided Brand Awareness 70% 60% 50% 40% 30% 20% 10% 0% Massachusetts Mid Atlantic Charter One 1999 2002 2005 15
Slide 37: Retail Banking Performance: Customer Satisfaction
Citizens Retail Banking: Performance Customer Satisfaction 90% 80% 70% 60% 50% Massachusetts Mid Atlantic Charter One 1999 2002 2005 16
Slide 38: Retail Banking Performance: Deposits Per Branch
Citizens Retail Banking: Performance Deposits Per Branch $100.0 $80.0 $60.0 $ Millions $40.0 $20.0 $0.0 New England Mid Atlantic Charter One 1999 2002 2005 17
Slide 39: Retail Banking Performance: Consumer Loans Per Branch
Citizens Retail Banking: Performance Consumer Loans Per Branch 30 20 $ Millions 10 0 New England Mid Atlantic Charter One 1999 2002 2005 18
Slide 40: Retail Banking Performance: Small Business Customers
Citizens Retail Banking: Performance Citizens Small Business Customers 200,000 160,000 120,000 80,000 40,000 0 New England Mid Atlantic Charter One 1999 2002 2005 19
Slide 41: Citizens Retail Banking: Summary
Citizens Retail Banking: Summary • A significant business with scale • Business model is solid and well understood • The strategy has worked well and there is an exciting growth opportunity 20
Slide 42: Commercial Banking
Commercial Banking Steve Steinour President Citizens Financial Group
Slide 43: Commercial Customers
Commercial Customers Target commercial customers in geographic footprint Three customer segments, Middle Market Commercial – sales $15m - $250m Mid-Corporate – sales above $250m - $1bn Commercial Real Estate Joint approach with RBS to larger companies – sales above $1bn Various special
Slide 44: Relationship Management Model
Relationship Management Model Relationship managers located in business centers in major cities across footprint 359 commercial relationship officers across the footprint New England 142 Mid Atlantic 70 Midwest 81 Specialist Groups 66 78 Product support sales staff Cash management 48
Slide 45: Relationship Management Model
Relationship Management Model Relationship managers organized geographically by state State President Team leaders Hire experienced lenders/teams of lenders Detailed management oversight, including weekly reporting of Calling activity Transaction pipeline Cross-sell activity 4
Slide 46: Senior Management Involvement
Senior Management Involvement Significant contact with customers by senior management Loans over $10 million: State President Loans over $25 million: Steve Steinour/Bob Mahoney Larry Fish active in client solicitation and retention “Officer for Life” program in New England 20 senior offi
Slide 47: Commercial Products
Commercial Products Lending Lead relationship product Cash management/deposits Generates significant low-cost deposits Merchant acquiring/commercial cards RBS Lynk Systems/RBS National Bank 6
Slide 48: Commercial Products
Commercial Products Foreign exchange/trade finance Utilize RBS expertise Interest rate risk management Leverage RBS product development, risk management Syndications/securitization/private placements/debt capital markets Leverage RBS Greenwich 7
Slide 49: Commercial Credit Approval Process
Commercial Credit Approval Process Commercial credit policy is set centrally Lending decisions are based on individual judgments Decisions are taken by credit committees All credit committees are chaired by senior credit officers Minimum of two signatures on every transaction Transaction
Slide 50: Case Study
Case Study Long time client – relationship began with funding for initial start-up Provided credit facilities, cash management and foreign exchange/trade finance Citizens brought in RBS for syndication of $240 million senior credit facility as sole bookrunner 9
Slide 51: Case Study
Case Study In 2004, this company moved its banking relationship from Chase and BofA to Citizens, in a competitive situation Citizens took over as the lead bank and agent and syndicated the credit facility. Citizens also took over the cash management. Subsequent assistance by RBS on syndication
Slide 52: Outlook
Outlook Large new markets with small shares eg., Chicago/Cleveland/Indianapolis/Detroit/Upstate New York RBS Greenwich partnership Greater focus in 2005 Budgeted goals Credit quality remains strong Loan demand throughout the footprint is growing 11
Slide 53: Manufacturing / Charter One Integration; National Consumer Businesses
Manufacturing / Charter One Integration National Consumer Businesses Mark Formica Vice Chairman Citizens Financial Group
Slide 54: Manufacturing
Manufacturing Central manufacturing division Technology Processing Call centers Communications 2
Slide 55: Manufacturing
Manufacturing Location Activity Employees Cranston, RI Technology 650 East Providence, RI & Deposit & Commercial 2,200 Philadelphia, PA Loan Operations Warwick, RI Consumer Loan Operations 900 Cranston, RI & Phonebank 950 Pittsburgh, PA 3
Slide 56: Integration
Integration Conversion to Citizens model Detailed plans prepared before announcement Commitment to plans and budgets established in due diligence Standard approach followed each time Experienced integration team 4
Slide 57: Charter One Conversion
Charter One Conversion Big 2.3 million customers 3.3 million accounts 570,000 online customers 769 branches 862 ATMs Wide geography – 900 mile span 5
Slide 58: Charter One Conversion
Charter One Conversion Technically complex Account numbers preserved to minimize impact on customers Multiple brands supported by common platform Multiple core system upgrades 100+ new product types PeopleSoft deployment for entire bank Image statements/e-statements New cards (debit,
Slide 59: Charter One Conversion
Charter One Conversion • Fast April 2004 Initial meeting in Cleveland May 2004 Announcement of transaction September 2004 Completion of transaction November 2004 Phase I – MA, CT, PA May 2005 Phase II – NY, VT June 2005 Phase III – IL, IN July 2005 Phase IV – MI, OH July 2005 Back office, Fi
Slide 60: National Consumer Businesses
National Consumer Businesses Established businesses (augmented by Charter One) Indirect auto lending Mortgage lending New businesses National home equity (de novo) Credit cards (acquisition) Kroger joint venture (de novo) Merchant acquiring (acquisition) 8
Slide 61: Indirect Auto Lending
Indirect Auto Lending Origination of auto loans to consumers through auto dealers in most states Established business Based in Providence, RI, 231 employees #2 largest bank lender in US 1.2 million customers, through 7,400 auto dealers Strong credit quality All loans secured Average
Slide 62: Mortgage Lending
Mortgage Lending Origination of mortgages directly from consumers nationally and through branch network Established business Based in Richmond, Virginia, 1,156 employees $32 billion of loans serviced / 300,000 loans All loans conservatively underwritten and 100% secured by first lien on re
Slide 63: National Home Equity
National Home Equity Origination of home equity loans in most states through Internet sites and through national broker network De novo Internet platform, established September 2004 Based in Cincinnati, Ohio, 88 employees Average FICO: 730 plus 11
Slide 64: Credit Cards
Credit Cards Acquired People’s Bank credit card portfolio in March 2004, now operating as RBS National Bank Based in Bridgeport, Connecticut, 546 employees 1.5 million customers / $2.5 billion of outstandings, 19% growth in 2005 Prime and super prime customers only Average FICO: 716 Oppo
Slide 65: Kroger Joint Venture
Kroger Joint Venture Distribution of financial products to customers of Kroger, leveraging Kroger's customers and Citizens’ platform De novo joint venture, launched in October 2004 Based in Cincinnati, Ohio Kroger is 2nd largest supermarket group in US, with 40 million customers and 2,500 su
Slide 66: Kroger Personal Finance
Kroger Personal Finance xX Citizens A Financial Group, Inc.
Slide 67: Merchant Acquiring
Merchant Acquiring Providing merchant acquiring services for small businesses nationally Acquired Lynk Systems in September 2004 Based in Atlanta, Georgia, 1,319 employees 10th largest merchant acquirer in US 127,000 merchant customers, 24% growth in 2005 Opportunities for growth Conti
Slide 68: Outlook
Outlook Good momentum across range of businesses Remain in high quality lending, all secured except credit cards No interest in sub-prime lending Diversified brands and distribution channels 16
Slide 69: Operations; National Consumer Businesses
Operations National Consumer Businesses Mark Formica Vice Chairman Citizens Financial Group
Slide 70: Conclusion
¥¢ Citizens AG Financial Group, Inc. Conclusion Larry Fish * CUSTOMERS * COLLEAGUES *COMMUNITY
Slide 71: Conclusion
Conclusion Economy still strong – expect 3-4% GDP growth in 2006 Yield curve may remain flat for some time Some in-fill acquisition opportunities may develop Build local market share in important metropolitan areas However, prices remain high Primary focus for 2006 is organic growth Ma
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