Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q4 2019 Earnings Presentation
39 slides from Citizens Financial's earnings presentation, Jan 17, 2020
Slide 1: 4Q19 and 2019 Financial Results
4Q19 and 2019 Financial Results January 17, 2020 Exhibit 99.2
Slide 2: Forward-looking statements and use of key performance metrics and non-GAAP financial measures
Forward-looking statements and use of key performance metrics and 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 are for
Slide 3: 4Q19 and Full Year 2019 GAAP financial summary
4Q19 and Full Year 2019 GAAP financial summary See pages 37-38 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 29.
Slide 4: Table of contents
Table of contents page 4Q19 Highlights 5 4Q19 Underlying financial summary 6 2019 Underlying financial summary 7 Net interest income 8 Noninterest income and expense 9-10 Average loans and funding 11-12 Credit quality and capital 13-14 CECL standard implementation 15 Update: TOP 6 Program transforma
Slide 5: 4Q19 Highlights
Solid profitability and returns Strong capital, liquidity and funding Strong credit quality Continued progress on strategic growth, efficiency and balance sheet optimization initiatives Overall credit quality remains strong; NPLs of 59 bps of loans improved 4 bps from 63 bps in 3Q19 and improved fro
Slide 6: 4Q19 Underlying financial summary
Highlights 4Q19 Underlying financial summary(1) Linked quarter: Underlying net income available to common down slightly, with EPS of $0.99 up 1%; TBV/share up 2% 3Q19 results included the impact of an aircraft lease restructure that increased other noninterest income $7 million, noninterest expense
Slide 7: 2019 Underlying financial summary
Highlights 2019 Underlying financial summary(1) See pages 37-38 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 29. See page 3 for
Slide 8: Net interest income
Highlights Net interest income Linked quarter: NII relatively stable as the benefit of 2% interest-earning asset growth was offset by the impact of the challenging rate environment on NIM NIM of 3.06% decreased 6 bps as a reduction in interest-earning asset yields tied to lower interest rates was on
Slide 9: Noninterest income
Noninterest income Highlights Linked quarter: Record noninterest income of $494 million reflects record results in capital markets and FX & IRP and solid results in trust and investment services fees, offset by lower mortgage banking fees from record 3Q19 levels and a $7 million decrease tied to the
Slide 10: Noninterest expense
$s in millions Noninterest expense Highlights Linked quarter: Underlying noninterest expense decreased $5 million from higher 3Q19 levels that included $10 million related to the lease transaction Salaries and employee benefits decreased $7 million, or 1%, reflecting the impact of efficiency initiat
Slide 11: Average loans and leases
Average loans and leases Highlights YoY loan growth á 3% á 3% á 3% Total core Total core retail Total core commercial Total core commercial loans and leases Total core retail loans (2) Linked quarter: Core loans and leases up $1.7 billion, or 1.5%; up 1.8% before the impact of 4Q19 loan sales activi
Slide 12: Average funding and cost of funds
Linked quarter: Total deposits up $1.7 billion, or 1% Growth in money market, demand deposits, savings and checking with interest, largely offset by a decrease in term deposits Citizens Access® deposits of $5.8 billion at quarter end Total deposit costs and cost of funds down 12 bps, reflecting proa
Slide 13: Credit quality remains strong
Credit quality remains strong(1) $s in millions (2) Nonperforming loans Allowance for loan and lease losses Highlights Provision for credit losses, net charge-offs Provision for credit losses Total net c/os Net c/o ratio Core c/o ratio Overall credit quality remains strong across retail and commerci
Slide 14: Capital levels remain at the higher end of the range for regional peers
Capital levels remain at the higher end of the range for regional peers 4Q19 CET1 ratio of 10.0% decreased 30 bps from 3Q19 LDR of 95.0% compares with 94.5% in 3Q19 2019 Capital Plan reflects further commitment towards prudent return of capital Increased quarterly common dividend by 8% in 1Q20 Repur
Slide 15: CECL standard implementation
Current Expected Credit Loss (“CECL”) standard implementation Estimated 1/1/2020 Day-1 cumulative impact of CECL implementation: Net increase to allowance for credit losses of ~30%-35%;~22-25 bp reduction of CET1 on a fully-phased in basis Expect an increase in retail reserves tied to longer-duratio
Slide 16: Strategic initiatives update
4Q19 YoY Strategic initiatives update Fee growth Consumer Enhance mortgage platform Strong mortgage banking fees; originations up 95% and gain on sale margins improved 15 bps Expand wealth Strength in trust and investment services fees, up 21%; Managed money revenue up 18%; AUM up 120%, 26% excludin
Slide 17: Update: TOP Program transformation initiatives
Update: TOP 6 Program transformation initiatives Redesign go-to-market operating model Significantly enhance ability to innovate, adapt and deliver for customers through agile ways of working Empower cross-functional network of teams with a clear mission and strategy Shorten cycles for product and t
Slide 18: Update: Strategic revenue initiatives
Update: Strategic revenue initiatives Selected examples Launching current wave of strategic revenue initiatives designed to add new capabilities and customers and position the bank well for future top-line growth Planned initial investment of ~$40 million pre-tax in 2020, with ~70% capex/30% opex Wi
Slide 19: Key performance drivers into 2020 and beyond
Key performance drivers into 2020 and beyond Success will be driven by what got us here today Growth mindset with continued investments for the future Customer-focused culture Strong and experienced board and leadership team, best-in-class talent Proven execution ability and commitment to excellence
Slide 20: Underlying FY2019 performance vs. guidance
Underlying FY2019 performance vs. guidance(1)(2) Results reflect strong execution against targets through a challenging yield curve environment See pages 37-38 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying” result
Slide 21: FY2020 outlook
FY2020 outlook See pages 37-38 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 29. Net interest income growth of ~1-2% NIM decline
Slide 22: 1Q20 outlook
1Q20 outlook See pages 37-38 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 29. (2) (1) (1)
Slide 23: Key messages
Key messages Citizens continues to execute well and deliver for stakeholders 4Q19 results reflect the benefit of diversified business model Record fee income reflects the build out of fee businesses Average loan growth of 3% YoY, up 4% before loan sales activity Deposits up 7% YoY; deposit cost disc
Slide 24: Appendix
Appendix Xx Citizens nancial Group,
Slide 25: Medium-term financial targets
Medium-term financial targets(1) Medium-term financial targets Economic assumptions Real GDP growth: ~2.0% annually No Fed Funds rate changes in 2020; bias towards modest upward Fed moves in 2021/22. Expect modest curve steepening Unemployment rate: ~3.5% ~14-16% ~9.75-10.00% ~54% ROTCE Efficiency R
Slide 26: Year-over-Year Underlying results
Average loans $s in billions Average deposits $s in billions Year-over-Year Underlying results(1) Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common eq
Slide 27: Linked-quarter Underlying results
Average loans $s in billions Average deposits $s in billions Linked-quarter Underlying results(1) Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common eq
Slide 28: Full year Underlying results
Full year Underlying results(1) Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common equity á 6% Average loans $s in billions Average deposits $s in bill
Slide 29: Notable Items
Notable Items(1) 2019 quarterly and fourth quarter 2018 results reflect notable items related to integration costs primarily tied to the August 1, 2018 Franklin American Mortgage Company (“FAMC”) acquisition. Fourth quarter and full year 2019 and 2018 results also reflect costs related to strategic
Slide 30: GAAP noninterest income and noninterest expense summary
GAAP noninterest income and noninterest expense summary $s in millions
Slide 31: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data
Slide 32: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data
Slide 33: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data
Slide 34: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data
Slide 35: Key performance metrics, Non-GAAP financial measures and reconciliations
$s in millions, except share, per share and ratio data Key performance metrics, Non-GAAP financial measures and reconciliations
Slide 36: Non-GAAP reconciliations – Underlying excluding Acquisitions
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding Acquisitions $s in millions, except share, per share and ratio data
Slide 37: Notes on Key Performance Metrics and Non-GAAP Financial Measures
Notes on Key Performance Metrics and Non-GAAP Financial Measures See important information on Key Performance Metrics and 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
Slide 38: Notes on slide – FY2020 outlook
Notes on slide 21 – FY2020 outlook See above note on key performance metrics and non-GAAP financial measures. Includes an impact of approximately 10 basis points to the CET1 ratio related to the increase in risk weighting on mortgage servicing assets to 250% from 100% based on an interagency rule ap
Slide 39: 3* Citizens
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q4 2019 Earnings Presentation on 6ix