Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2017 Earnings Presentation
34 slides from Citizens Financial's earnings presentation, Apr 20, 2017
Slide 1: 1Q17 Financial Results
1Q17 Financial Results April 20, 2017
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 Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement
Slide 3: 1Q17 highlights
1Q17 highlights Net income of $320 million up 43% vs.1Q16 and up 13% vs. 4Q16; Diluted EPS of $0.61 up 49% vs. 1Q16 and up 11% vs. 4Q16 ─ Continued progress with ROTCE of 9.7%, compared to 6.6% in 1Q16 and 8.4% in 4Q16(1) ─ Results include a $23 million benefit, or $0.04 per diluted common share, re
Slide 4: GAAP financial summary
GAAP financial summary 1Q17 change from Highlights $s in millions 1Q17 4Q16 1Q16 4Q16 1Q16 YoY Linked quarter: $ % $ % excluding certain tax Net income up 13% and EPS up 11% from 4Q16 Net interest income $ 1,005 $ 986 $ 904 $ 19 2 % $ 101 11 % items(1) ─ 1Q17 results included a $23 million, or $0.04
Slide 5: Net interest income
Net interest income $s in millions, except earning assets Net interest income Highlights $132B $135B $136B Linked quarter: $126B $129B NII up $19 million, or 2% ─ Reflects 1.5% average loan growth driven by commercial, education, mortgage and other unsecured retail loans, partially offset by the imp
Slide 6: Net interest margin
Net interest margin NIM walk 4Q16 to 1Q17 0.08% (0.01)% (0.03)% 0.02% 2.90% 2.96% 4Q16 NIM% Loan Borrowing Deposit Investment 1Q17 NIM% yields costs/other costs portfolio yield/growth NIM walk 1Q16 to 1Q17 0.20% (0.01)% (0.06)% (0.03)% 2.86% 2.96% 1Q16 NIM% Loan Borrowing Deposit Investment 1Q17 NIM
Slide 7: Noninterest income
Noninterest income $s in millions 1Q17 change from Highlights 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Noninterest income improved $2 million Service charges and fees $ 125 $ 132 $ 126 $ (7) (5) % $ (1) (1) % Service charges and fees decreased $7 million, reflecting Card fees 60 50 50 10 20
Slide 8: Noninterest expense
Noninterest expense $s in millions 1Q17 change from Highlights 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Noninterest expense increased $7 million, or 1% Salaries and benefits $ 444 $ 420 $ 425 $ 24 6 % $ 19 4 % Salaries and employee benefits expense increased $24 million Occupancy 82 77 76 5
Slide 9: Consolidated average balance sheet
Consolidated average balance sheet 1Q17 change from Highlights $s in billions 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Total earning assets up $1.7 billion, or 1%, with loan Investments and interest bearing growth of $1.5 billion, or 1.5%. Period-end loans up deposits $ 27.8 $ 27.7 $ 25.5 $
Slide 10: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $56.2B $56.9B Linked quarter: $54.0B $55.0B $53.5B $3.1 Average loans increased $655 million, or 1%, largely reflecting $2.6 $3.0 $2.5 $2.5 $2.9 growth in education, residential mortgages and other $2.9 $2.9
Slide 11: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $45.9B $46.5B $46.9B $48.0B Linked quarter: $43.8B $4.0 Average loans up $1.1 billion, or 2%, with continued strength in $3.5 $3.3 $3.7 Commercial Real Estate, Mid-corporate and Middle Market, $3.2 Franchi
Slide 12: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $124.3B $126.3B Linked quarter: $119.0B $121.0B $115.9B Total average deposits up $829 million, or 1% $11.0 $12.4 $10.3 $10.9 ─ Largely reflecting growth in term deposits, checking $9.9 $4.2 $3.9
Slide 13: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Provision for credit losses, Highlights net charge-offs (recoveries) Overall credit quality continues to improve, reflecting growth in higher quality, lower risk retail $104 $102 loans and stable risk appetite in commercial $96 NPLs to total loans
Slide 14: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 1Q16 2Q16 3Q16 4Q16 1Q17 Capital levels remain at the higher end of the range for (1,2) Basel III transitional basis regional peers Common equity tier 1 capital $ 13.6 $ 13.8 $ 13.8 $ 13.8 $ 13.9 Risk-weighted assets $
Slide 15: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 1Q17 Initiative Commentary Status Primary households up ~23,000 YoY and added ~15,000 primary HHs with a loan or investment. Continue to Grow and deepen relationships build out Mass Affluent and Affluent value propositions. Citizens Checkup continues to h
Slide 16: Self funding necessary investments through our efficiency initiatives
Self funding necessary investments through our efficiency initiatives Tapping Our Potential (TOP) programs remain on track TOP III Program Launched mid 2016 — Targeted run-rate pre-tax benefit of $100-$115 million by end of 2017 Revenue initiatives Target ~$25-$30 million Commercial Attrition: Predi
Slide 17: Making consistent progress against our financial goals
Making consistent progress against our financial goals Goal is to deliver a 10%+ run-rate ROTCE in the medium term Key Indicators Medium-term 9.68% targets 8.98% Adjusted ROTCE(1) 6.76% 6.73% 6.67% 6.60% 6.75% 6.61% 7.30% 8.02% 8.43% 10%+ 4.34% 5.24% 5.24% 6.28% 6.22% Adjusted return 0.91% on averag
Slide 18: 2Q17 outlook
2Q17 outlook 1Q17 2Q17 expectations vs. 1Q17 Net interest $108.1 billion average loans Period-end loans up ~1.5%; ~1% average loan growth income, net 2.96% NIM Expect ~3-4 basis point improvement in net interest interest margin margin given benefit of recent rate rise Noninterest $379 million nonint
Slide 19: Key messages
Key messages Citizens 1Q17 results highlight continued momentum ─ Strong revenue, net income and EPS growth ─ Robust operating leverage, expanding net interest margin, improving efficiency ratio and active capital management ─ ROTCE of 9.7%; 9.0% excluding the impact of certain state tax matters Str
Slide 20: Appendix
Appendix 3* Citizens Financial Group, Inc.” 20
Slide 21: Linked-quarter results
Linked-quarter results Pre-provision profit Period-end loans (1) Return on average total $s in millions $s in billions tangible assets $s in billions $516 $530 3% $107.7 $108.1 0.4% 0.91% 12 bps 0.79% 4Q16 1Q17 4Q16 1Q17 4Q16 1Q17 Net income and EPS Period-end deposits Return on average tangible $s
Slide 22: Quarter-over-quarter results
Quarter-over-quarter results Pre-provision profit Period-end loans (1) Return on average total $s in millions $s in billions tangible assets $s in billions $530 25% $108.1 7% 0.91% 23 bps $101.0 $423 0.68% 1Q16 1Q17 1Q16 1Q17 1Q16 1Q17 Net income and EPS Period-end deposits Return on average tangibl
Slide 23: We remain positioned for rising rates…
We remain positioned for rising rates… …but also see continued opportunity to enhance performance by executing well on our initiatives Interest rate sensitivity ranking 11.0% (200 bps gradual increase) 6.5% 6.5% Net interest income poised to benefit from rising rates 6.0% 5.2% ─ Continue to target a
Slide 24: Consumer Banking segment
Consumer Banking segment 1Q17 change from Highlights $s in millions 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Net income increased $3 million, or 3% Net interest income $ 638 $ 639 $ 581 $ (1) — % $ 57 10 % Net interest income remained relatively stable vs. 4Q16 as the benefit of Noninterest
Slide 25: Commercial Banking segment
Commercial Banking segment 1Q17 change from Highlights $s in millions 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Commercial Banking net income increased $8 million, or 5% Net interest income $ 346 $ 347 $ 300 $ (1) — % $ 46 15 % Total revenue increased $11 million, or 2%, driven by loan Nonint
Slide 26: Other
Other 1Q17 change from Highlights $s in millions 1Q17 4Q16 1Q16 4Q16 1Q16 Linked quarter: $ % $ % Other recorded net income of $45 million, up $27 million Net interest income $ 21 $ — $ 23 $ 21 100 % $ (2) (9) % First quarter results included a $23 million benefit, or $0.04 per Noninterest income 25
Slide 27: 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 QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $ % $ % Noninterest inc ome, adjusted: Noninterest income (GAAP) $379 $377 $435 $355 $330 $2 1% $49 15 % Les
Slide 28: 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 QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,384 $1,363 $1,380 $1,278 $1,234 $21 1.54 % $15
Slide 29: 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 QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Tangible book value per c ommon share: Common shares - at end of period (GAAP) M 509,515,646
Slide 30: 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 QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 3Q16 2Q16 1Q16 4Q16 1Q16 $ % $ % Other inc ome, adjusted Other income (GAAP) $24 $25 $87 $15 $20 ($1) (4%) $4 20 % Less: Notable item
Slide 31: Key performance metrics, Non-GAAP financial measures and reconciliations – segment
Key performance metrics, Non-GAAP financial measures and reconciliations – segment $s in millions, except share, per share and ratio data THREE MONTHS ENDED MAR 31, THREE MONTHS ENDED DEC 31, THREE MONTHS ENDED SEPT 30, 2017 2016 2016 Consumer Commerc ial Consumer Commerc ial Consumer Commerc ial Ba
Slide 32: Key performance metrics, Non-GAAP financial measures and reconciliations – underlying
Key performance metrics, Non-GAAP financial measures and reconciliations – underlying $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q17 Change 1Q17 4Q16 1Q16 4Q16 1Q16 $/bps % $/bps % Inc ome before inc ome tax expense (GAA P) A $434 $414 $332 $20 5% $102 31 % Inc ome tax
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 FOR THE THREE MONTHS ENDED MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, 2017 2016
Slide 34: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q1 2017 Earnings Presentation on 6ix