Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (March 2017)
53 slides from Citizens Financial's debt investor presentation, March 2017
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation March 2017 Dave Lindenauer, Treasurer Ellen Taylor, Head of Investor Relations
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: Overview
Overview Company overview and strategy Improving financial performance Capital/funding and liquidity Risk management 2
Slide 4: Company overview and strategy
Company overview and strategy 3
Slide 5: Key investment highlights
Key investment highlights Attractive, 12th largest retail bank holding company in the U.S. with attractive client-centric demographic opportunity in core markets franchise with Attractive business mix with improving profitability scale Client-centric model focused on deepening customer relatio
Slide 6: We are led by a strong and experienced board & leadership team
We are led by a strong and experienced board & leadership team Since January 2015, have attracted or promoted from within ~32% of our Executive Leadership Group (top 137) Leadership Team Member Title Board Member Committees Bruce Van Saun Chairman and Chief Executive Officer Bruce Van Saun Chairman
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension(1) Rank(3) Top 5 deposit market share in 9 of 10 largest MSAs(2) Assets: $149.5 billion #12 Loans: $107.7 billion(4) #11 Deposits: $109.8 billion #12 Manchester, NH: #1 Rochester, NY: #5 Branches: ~1,
Slide 8: Robust product offerings and balanced business mix
Robust product offerings and balanced business mix Consumer Commercial Retail Deposit Services Corporate Banking Mobile/Online Banking Deep client Extensive Commercial Real Estate Credit/Debit Card + relationships product set Franchise Finance Wealth Management Asset Finance Home E
Slide 9: Strong, clean balance sheet funded with low-cost deposits
Strong, clean balance sheet funded with low-cost deposits Well capitalized with a common equity tier 1 capital ratio of 11.2%(1) Strong asset-quality performance with net charge-offs of 39 bps(2) in 4Q16 Robust deposit franchise with $88.9 billion of average core deposits(3), with 55% retail,
Slide 10: Improving financial performance
Improving financial performance 9
Slide 11: Delivered attractive balance sheet and revenue growth in 2016
Delivered attractive balance sheet and revenue growth in 2016 FY16 vs. FY15 A strong platform well-positioned to drive value Strong loan growth Growing revenues faster Higher NIM expansion (Average total loan growth) (Total revenue growth(1)) (Net interest margin change) ` 8.9% 11 bps vs Peers vs Pe
Slide 12: With continued focus on expense control and improving returns
With continued focus on expense control and improving returns FY16 vs. FY15 Well-controlled expenses; Strong operating leverage Efficiency improvement (YoY Positive operating leverage(1)) (Efficiency ratio(1) change) investing for growth (Noninterest expense(1) change) 62 bps vs Peers 6.1% vs Peers
Slide 13: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives FY16 Initiative Commentary Status Primary HHs up YoY. Citizens Checkup helped drive ~400,000 appointments in FY16 with focus on deepening Reenergize household growth relationships with mass affluent and affluent customers. Strong momentum in scaling the b
Slide 14: 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 II Program TOP III Program Launched mid 2015 — Delivered $105 million in annual pre-tax Launched mid 2016 — Targeted run-rate benefit for 2016 benefit of $100-$115 million b
Slide 15: Consistently enhancing our capabilities and gaining market share
Consistently enhancing our capabilities and gaining market share Consumer Commercial Continued strong focus on customer experience Continued leading customer satisfaction scores(6) ─ Consistent customer branch experience; scores 10% above ─ Overall satisfaction indicates continued progress in se
Slide 16: Making consistent progress against our financial goals
Making consistent progress against our financial goals Goal is to deliver a 10%+ run-rate ROTCE(1) in the medium term Medium-term Key Indicators Targets 8.02% 8.43% Adjusted 6.28% 6.22% 6.76% 6.73% 6.67% 6.60% 6.75% 6.61% 7.30% 10%+ 5.24% 5.24% ROTCE(1) 4.34% 0.80% 0.79% Adjusted return on 0.68% 0.6
Slide 17: 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) Net interest income poised to benefit from rising rates ─ ~70-75% of asset sensitivity is center
Slide 18: FY2017 outlook
FY2017 outlook Adjusted FY2016(1) FY2017 expectations vs. Adjusted FY2016(1) $130.5 billion average earning assets 5.5-6.5% average earning asset growth Balance sheet $103.4 billion average loans 5.5-7% average loan growth growth $105.4 billion average deposits 5.5-7% average deposit gro
Slide 19: 2017 outlook – NIM drivers and growth
2017 outlook – NIM drivers and growth Comments Some additional benefit from shift in loan mix to higher return products Earning asset mix Reduced back book runoff helping to mitigate competitive commercial and yields pricing dynamics Enhanced customer product offerings targeted at mass affluen
Slide 20: Strong growth in net interest income
Strong growth in net interest income Net interest income growth 2015-2016 6.2% (1.2)% (0.4)% (0.3)% 6.1% $3,758 $3,402 2015 Loan growth Loan mix/ Investment Deposit Borrowings/ 2016 yields portfolio costs other (1) NIM% 2.75% 0 bps +16 bps (3) bps (1) bps (1) bp 2.86% Net interest income outlook 201
Slide 21: Noninterest expense remains well controlled
Noninterest expense remains well controlled $s in millions Adjusted noninterest expense(1) trend 2015-2016 0.9% (2.1)% 0.7% 2.0% 1.8% $3,316 $3,209 5.5% Adjusted 2015(1) Other salaries & Business growth Outside services, Equipment and Efficiency initiatives Adjusted 2016 (1) employee benefits initia
Slide 22: Keys to successful 2017 financial performance
Keys to successful 2017 financial performance Expect improved economic environment with steady GDP growth, solid loan demand, and gradual rate hikes Drive strong, prudent loan growth across consumer and commercial Deliver improving NIM with continued focus on asset optimization and gathering low
Slide 23: Capital/funding and liquidity
Capital/funding and liquidity 22
Slide 24: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers 4Q16 total capital comparison(1) Highlights Maintaining substantial capital buffer relative to peers despite above- peer average stress-test performance FITB 10.4% 15.0% Executed $2.2 billion in net capital transactions since June 2014, mi
Slide 25: 2016 DFAST minimum stressed capital levels substantially above peers
2016 DFAST minimum stressed capital levels substantially above peers Severely Adverse Scenario 4Q15 Common equity tier 1 ratio 4Q15 Total capital ratio 11.7% 15.3% 10.3% 13.6% 151 bps 195 bps 12.3% 8.8% projected above peers projected above peers minimum 10.4% minimum 7.3% CFG Peer Average (1) CFG P
Slide 26: Consolidated average balance sheet
Consolidated average balance sheet 4Q16 change from Highlights $s in billions 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Total earning assets up $3.1 billion, or 2%, with loan Investments and interest bearing growth of $2.5 billion, or 2% deposits $ 27.7 $ 27.1 $ 25.7 $ 0.6 2 % $ 2.0 8 % Tot
Slide 27: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 91% U.S. Agency MBS $24.0 2.59% $25.7 2.52% $1.0 4% AAA-rated non-agency $0.9 $0.9 $1.2 $4.1 Total HTM 18% of total earning assets, in line with peers $4.1 $0.4 $0.6 Primary goal is to provide a sour
Slide 28: Solid deposit base provides attractive, low-cost funding
Solid deposit base provides attractive, low-cost funding $98.8 billion 2009 average deposits $109.1 billion 4Q16 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 6% Demand 18% 11% 26% Term 30% Checking 16% with Interest 39% 18% Savings & Checking with 35% Money Market Inte
Slide 29: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities (1) 16.8% 14.8% 13.6% 12.6% 12.5% 12.3% 11.5% 9.7% 9.2% 8.1% 7.2% PNC FITB CFG KEY BBT USB Peer Avg STI MTB CMA RF FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordi
Slide 30: Risk management
Risk management 3% Citizens Financial Group, Inc.” 29
Slide 31: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Net charge-offs (recoveries) Highlights $104 Overall credit quality continued to improve, reflecting the benefit of growth in high quality lower $6 risk retail loans and stabilization in commercial $83 $83 $82 $77 NPLs to total loans and lease
Slide 32: Diversified and granular loan mix
Diversified and granular loan mix $56.0 billion $51.7 billion 4Q16 retail portfolio 4Q16 commercial portfolio Business Non-Core Other Out of Banking Non-Core Out of 26% footprint(1,2) 34% footprint(1,2) Education Finance 3% Leases 2% 3% Home 5% Credit Cards 11% Equity 6% 14% Midwest 28% 12% Midwest
Slide 33: Strong credit quality
Strong credit quality Overall portfolio credit metrics have generally trended in line with regional banking peers Core portfolio credit trends are favorable; non-core portfolio has been a drag, but continues to run off Net charge-offs Non-performing loans $s in millions $s in billions $1,849 $2.
Slide 34: Appendix
Appendix 3% Citizens Financial Group, Inc.” 33
Slide 35: Core retail portfolio
Core retail portfolio Highlights 3Q16 $53.4 billion core retail portfolio Weighted-average core FICO score of 760 by Product type by Geography(1) by refreshed FICO(1) 63% of the retail portfolio has a FICO score Education Other <600 of >750 Out of New 600-649 Finance 3% 3% Footprint 5% 650-699 H
Slide 36: Core home equity portfolio
Core home equity portfolio(1) Highlights 3Q16 $14.2 billion HELOC 3Q16 $2.0 billion HELOAN 52% of the portfolio is secured by 1st lien by Lien position(2) by Lien position (2) Weighted-average FICO of 766 86% has an LTV of less than 80% 2nd 1st 34% 3Q16 HELOC originations of $1.3 billion 50%
Slide 37: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of September 30, 2016 In no single year is the maturing population balance 2013 – $668 million 2014 – $899 million 2015 – $1.26 billion greater than $1.6 billion 5% 2% 4% 3% 3% 3% 4% 2% 6% Between 2016 and 2018, $3.0 billion ($2.9 bi
Slide 38: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 3Q16 $14.4 billion core mortgage portfolio Jumbo mortgages originated primarily within the (1) (1) Bank’s lending footprint by Refreshed CLTV by Refreshed FICO <600 600-649 90-100% 100%+ Predominately in-footprint with a 80-89% 2% 4% 1% 2% 6% 650-699 w
Slide 39: Auto portfolio credit metrics
Auto portfolio credit metrics $s in billions Highlights(1) 3Q16 $14.1 billion Auto portfolio Auto Finance portfolio – purchase only, no by Refreshed FICO score (1,2) by Origination LTV (2) leasing, weighted-average FICO score ≤ 600 of 731 % new car ≥ 120% ≤ 80% ≥ 800 5% 601-649 64% 12% 3Q16 orig
Slide 40: Core education finance portfolio overview
Core education finance portfolio overview Highlights 3Q16 $5.7 billion core education finance portfolio Core education finance portfolio average FICO score of 773 (1) by Refreshed FICO by Segment and co-sign rate of 51% Acquired <650 650-699 portfolios InSchool 95% of InSchool loans co-signed wi
Slide 41: Core commercial portfolio overview
Core commercial portfolio overview Highlights 3Q16 $49.4 billion core commercial portfolio Asset quality relatively stable and has reached by Industry Sector (1) pre-crisis levels Overall credit risk is moderate and compares well All Other(3) with peers Lessors 12% Real Estate Retailers 2% 21% –
Slide 42: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 3Q16 $9.8 billion Commercial Real Estate Line of Business (1) Continued progress in uptiering portfolio to by Facility Type by Property Type larger, more well-capitalized institutional and Land upper middle market borrowers Construction 2
Slide 43: Oil & Gas portfolio overview
Oil & Gas portfolio overview 4Q16 Oil & Gas outstandings Highlights Well-diversified portfolio with ~100 clients Tota l Uti l i zed Cri ti ci zed Nona ccrua l $s i n mi l l i ons O/S % % s ta tus Includes $326 million of corporate aircraft leases arising from Asset Finance Les s pri ce-s ens i t
Slide 44: Non-core portfolio overview
Non-core portfolio overview $s in billions Highlights Non-core assets $20.5 billion legacy non-core portfolio identified in June 2009 with $20.5 only $1.8 billion remaining; in September 2016, transferred an additional $1.2 billion of commercial loans and leases, largely $17.3 investment-grade air
Slide 45: Appendix – Key performance metrics, Non-GAAP Financial Measures and reconciliations
Appendix 2 – Key performance metrics, Non-GAAP Financial Measures and reconciliations 44
Slide 46: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $ % $ % $
Slide 47: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $/bps % $
Slide 48: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $/bps % $
Slide 49: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $ % $ % $
Slide 50: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions THREE MONTHS ENDED DEC 31, THREE MONTHS ENDED SEPT 30, THREE MONTHS ENDED JUNE 30, 2016 2016 2016 Consumer Commercial Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Oth
Slide 51: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions FULL YEAR 2016 2015 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income available to common stockholders: Net income (loss) (GAAP) A $345 $631
Slide 52: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data FOR THE THREE MONTHS ENDED DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SE
Slide 53: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
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