Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2024 Earnings Presentation
47 slides from Citizens Financial's earnings presentation, Apr 17, 2024
Slide 1: 1Q24 Financial Results
1Q24 Financial Results April 17, 2024
Slide 2: Forward-looking statements and use of non-GAAP financial measures
Forward-looking statements and use of non-GAAP financial measures This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward- looking statement. These stat
Slide 3: 1Q24 GAAP summary
1Q24 GAAP summary Q/Q Y/Y $s in millions 1Q24 4Q23 1Q23 $/bps % $/bps % Net interest income $ 1,442 $ 1,488 $ 1,643 $ (46) (3) % $ (201) (12) % Noninterest income 517 500 485 17 3 32 7 Total revenue 1,959 1,988 2,128 (29) (1) (169) (8) Noninterest Expense 1,358 1,612 1,296 (254) (16) 62 5 Pre-provis
Slide 4: 1Q24 Underlying financial summary
1Q24 Underlying financial summary(1) Q/Q Y/Y $s in millions 1Q24 $/bps % $/bps % Net interest income $ 1,442 $ (46) (3)% $ (201) (12)% Noninterest income 514 14 3 29 6 Total revenue 1,956 (32) (2) (172) (8) Noninterest expense 1,273 6 — 43 3 Pre-provision profit 683 (38) (5) (215) (24) Provision for
Slide 5: 1Q24 Underlying financial performance detail
1Q24 Underlying financial performance detail(1) (A) (B) (C) = (A) + (B) (D) (E) = (C) + (D) $s in millions Legacy Core(2) Private Bank Core Non-Core(3) Total CFG Net interest income $1,462 $16.8 $1,479 $(37) $1,442 Noninterest income 513 1.3 514 — 514 Total revenue 1,975 18.0 1,993 (37) 1,956 Nonint
Slide 6: 1Q24 Overview
1Q24 Overview(1) Underlying PPNR drivers $s in millions ■ Underlying EPS of $0.79; ROTCE of 10.6% 1Q24 QoQ – Stable NIM of 2.91% NII $ 1,442 (3.0)% Solid – Fees up 3% QoQ with improved Capital 1Q24 results Markets and Card fees Fees 514 3.0 % – Expenses broadly stable QoQ including Expenses 1,273 0.
Slide 7: Net interest income
Net interest income NII and NIM Linked Quarter $s in millions, except earning assets ■ NII down 3%, given 2% decrease in average interest- $202.6B $201.5B $203.1B earning assets, reflecting lower loans, and the impact $199.6B $200.1B of day count – NIM of 2.91% stable to prior quarter, reflecting $1
Slide 8: Noninterest income
Noninterest income(1) Fees up 3% QoQ reflecting improvement in Capital Markets and Card $ Linked Quarter $s in millions 1Q24 4Q23 1Q23 Q/Q Y/Y ■ Underlying noninterest income increased 3% Service charges and fees $ 96 $ 104 $ 100 $ (8) $ (4) – Service charges and fees decreased $8 million, given sea
Slide 9: Noninterest expense
Noninterest expense(1) Underlying expenses broadly stable QoQ; remain highly disciplined on expenses Linked Quarter $ $s in millions 1Q24 4Q23 1Q23 Q/Q Y/Y ■ Underlying noninterest expense of $1.27 billion, broadly stable Salaries & employee benefits $ 674 $ 635 $ 642 $ 39 $ 32 – Reflects increase i
Slide 10: Loans and leases
Loans and leases Loans down modestly reflecting continued balance sheet optimization Average loans and leases Linked Quarter $s in billions ■ Average loans down $3.1 billion, or 2%, reflecting planned $156.5 $153.7 Non-Core portfolio run off $150.8 $148.0 $144.8 $15.6 $14.4 $13.0 ~10% QoQ – Core loa
Slide 11: Deposit performance and cost of funds
Deposit performance and cost of funds Strong growth in Private Bank and retail branch deposits 1Q24 Period-end deposits Linked Quarter $s in billions ■ Period-end deposits down slightly $172.2 $177.7 $178.2 $177.3 $176.4 – Seasonal outflows in Commercial partially offset by growth in Private Bank an
Slide 12: Highly diversified and retail-oriented deposit base
Highly diversified and retail-oriented deposit base $176B Period-end deposits Business mix (As of 3/31/24) Product mix Wealth Business 1% Term Banking Citizens 14% 12% NIB Access Commercial 21% 6% 26% Savings 10% Citizens Access Savings Money Market Treasury/ 6% Checking 30% Branch Other With Intere
Slide 13: Credit quality overview
Credit quality overview Credit provision expense; Highlights $s in millions net charge-offs 0.50% ■ NCOs of $181 million, or 50 bps of average loans and 0.40% 0.40% 0.46% 0.34% leases ■ Nonaccrual loans increased 8% QoQ to 102 bps of total $176 $172 $171 $171 $171$181 loans driven by an increase in
Slide 14: Allowance for credit losses
Allowance for credit losses Allowance for credit losses Commentary $s in millions ■ The increase in the ACL reserve coverage to 1.61% 4Q23 1Q24 primarily reflects the decrease in loan balances and % % includes slightly higher reserve coverage for ACL Coverage ACL Coverage commercial, primarily CRE G
Slide 15: Strong capital position
Strong capital position Highlights $s in billions (period-end) 1Q23 2Q23 3Q23 4Q23 1Q24 (1)(2) ■ 1Q24 CET1 ratio of 10.6%(1) stable with 10.6% in 4Q23 Basel III basis – 8.9% CET1 ratio adjusted for AOCI opt-out removal Common equity tier 1 capital $ 18.4 $ 18.4 $ 18.4 $ 18.4 $ 18.1 ■ Capital ratios
Slide 16: Capital level remains near the top of the peer group
Capital level remains near the top of the peer group ■ Well positioned for changing regulatory environment ■ CET1 ratio under current rules of 10.6%(1), and 8.9% adjusted for AOCI opt-out removal; among the strongest within the peer group – Expect both ratios to converge to the 10.0-10.5% range over
Slide 17: Consumer Banking - transformed franchise
Consumer Banking - transformed franchise Demonstrating franchise quality High quality growth acceleration Strong deposit performance Strong customer growth Low-cost branch- Primary checking household growth based deposits (millions) ■ Strong low-cost deposit +16% 2.03 +~7% CAGR growth 1.76 ■ Signifi
Slide 18: Private Bank - high-quality, accretive growth
Private Bank - high-quality, accretive growth $s in billions Deposit growth Deposit mix as of 3/31/24 Strong accretive portfolio composition $2.4 CWI Term DDA 3% $1.2 3% 30% ■ ~80% of deposits are Commercial $0.2 Savings ■ DDA/CWI is 33% of deposit mix 3Q23 4Q23 1Q24 64% High-quality loans $s in bil
Slide 19: Commercial Banking - uniquely positioned
Commercial Banking - uniquely positioned Focused on middle market, mid- Private capital opportunity corporate, sponsor clients Built a formidable full-service corporate bank Private capital fundraising has led to record deal formation, M&A activity and fees ■ Multi-year investments in talent, capabi
Slide 20: 2Q24 outlook vs. 1Q24
2Q24 outlook vs. 1Q24 1Q24 2Q24 Underlying(1) Underlying outlook Net interest income $1,442MM ■ Down ~2% Noninterest income $514MM ■ Up ~3-4% Noninterest expense $1,273MM ■ Stable to down slightly Net charge-offs 50 bps ■ ~50 bps; ACL will continue to benefit from Non-Core run off CET1 ratio(2) 10.6
Slide 21: Citizens is an attractive investment opportunity
Citizens is an attractive investment opportunity Citizens continues to have a series of unique initiatives that will lead to relative medium-term outperformance – Transformed Consumer Bank with further deposit growth and Wealth revenue potential; well positioned in NYC metro to gain market share; pe
Slide 22: Appendix
Appendix
Slide 23: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets ê2% $177.1 $176.1 ê1% ê3 bps $148.0 $144.8 1.02% 0.94% 0.78% 0.75% 4Q23 1Q24 4Q23 1Q24 4Q23 1Q24 Pre-provision profit Net income available to Return on average ta
Slide 24: Year-over-year Underlying results
Year-over-year Underlying results(1) Average loans Average deposits Return on average total $s in billions $s in billions tangible assets ê7% é1% ê31 bps $174.4 $176.1 1.24% $156.5 $144.8 0.94% 1.06% 0.75% 1Q23 1Q24 1Q23 1Q24 1Q23 1Q24 Net income available to Return on average tangible Pre-provision
Slide 25: Medium-term NIM
Significant NII contribution from Non-Core and swaps in 2025 and beyond given run off and lower rates Medium-term NIM ■ 1Q24 NIM of 2.91% expected to benefit ~62 bps by 4Q27 from Non-Core and swaps, partially offset by a ~15-25 bps impact of an asset sensitive core balance sheet, resulting in a medi
Slide 26: Interest rate risk management - swaps
Interest rate risk management - swaps Protecting NII from adverse outcomes while reducing earnings volatility through economic cycles ■ Maintaining significant protection to downside in rates well into 2026 with receive-fixed swap portfolio Receive-fixed cash flow swaps (avg. notional in $ billions
Slide 27: Investment portfolio management
Investment portfolio management Maintaining strong liquidity, ...and improving yields relative $s in billions while shortening duration... to peer median... $48 $49 3.63% $40 $10 $10 3.25% $7 $6 $6 2.95% Cash $2 2.81% $5 $7 (1) 2.74% Floating ~$39B Fixed Hedged securities Fixed $31 $27 portfolio $26
Slide 28: AOCI accretion
AOCI accretion Projected accretion to TCE and CET1 adjusted for AOCI opt-out removal(1) Accretes to CET1(2) TCE CET1(2) 3/31/2024 $(1.3) $(0.3) $(2.5) $(4.2) $(2.8) 12/31/2024 $(0.7) $(0.3) $(2.0) $(3.1) $(2.4) 12/31/2025 $(0.2) $(0.3) $(1.7) $(2.2) $(2.0) 12/31/2026 $(0.3) $(1.4) $(1.8) $(1.7) ~58%
Slide 29: Non-Core portfolio update
Non-Core portfolio update Focusing on relationship-based lending with attractive risk-adjusted returns Non-Core portfolio Commentary ■ Non-Core portfolio of $9.9 billion retail loans as of $11.1 $9.9 March 31, 2024 $2.8 $2.6 $7.2 – $1.2 billion decline in 1Q24 $2.2 $4.6 $8.3 $7.3 $1.8 – ~4.3% WA loa
Slide 30: $72.8B Commercial credit portfolio
$72.8B Commercial credit portfolio Diverse and granular portfolio Commercial portfolio risk ratings(4) $s in billions % of ($ in billions) Balances total CFG C&I $57.5 $74.4 $72.8 Finance and Insurance B- and lower 3% 7% 7% Capital call facilities $ 5.1 4% B+ to B 14% 19% 20% Other Finance and Insur
Slide 31: Commercial Real Estate - $5.7B Office portfolio: well diversified
Commercial Real Estate - $5.7B Office portfolio: well diversified Property type $3.4B General Office class & location Life Sciences $0.9B 16% CBD Class A Suburban Class B 15% 29% Credit Tenant 24% CBD Class B $1.4B 10% Suburban Class A 39% General Office 60% $3.4B Suburban Class C 2% CBD Class C 5%
Slide 32: $70.4B Retail credit portfolio
$70.4B Retail credit portfolio Retail loans(1) High quality, diverse portfolio Other retail ■ Mortgage – FICO ~785 Education - 7% Residential – Weighted-average LTV of ~53% refinance mortgage ■ Home equity – FICO ~760 13% – ~35% secured by 1st lien Education - in school 4% 44% – ~98% CLTV less than
Slide 33: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type March 31, 2024 December 31, 2023 Loans and Loans and Allowance Coverage Allowance Coverage $s in millions Leases Leases Commercial and industrial(1)(2) $ 43,951 $691 1.57 % $ 44,975 $692 1.54 % Commercial real estate 28,872 734 2.54 29,471 73
Slide 34: Delinquency by product type
Delinquency by product type March 31, 2024 (%) December 31, 2023 (%) Days Past Due and Accruing Days Past Due and Accruing Current 30-59 60-89 90+ Nonaccrual Current 30-59 60-89 90+ Nonaccrual Commercial and industrial(1) 99.05 % 0.17 % 0.06 % 0.05 % 0.67 % 99.14 % 0.14 % 0.04 % 0.01 % 0.67 % Commer
Slide 35: Notable items
Notable items(1) Quarterly results reflect notable items primarily related to integration costs associated with recent acquisitions, as well as TOP revenue and efficiency initiatives and other expense reductions actions. In addition, first quarter 2024 and fourth quarter 2023 include a notable item
Slide 36: Notes
Notes Notes on Non-GAAP Financial Measures See important information on our use of Non-GAAP Financial Measures at the beginning this presentation and reconciliations to GAAP financial measures at the end of this presentation. Non-GAAP measures are herein defined as Underlying results. Where there is
Slide 37: Notes continued
Notes continued Notes on slide 20 - 2Q24 outlook vs. 1Q24 1) See note on non-GAAP financial measures. 2) See general note d). Notes on slide 23 - Linked-quarter Underlying results 1) See note on non-GAAP financial measures. Notes on slide 24 - Year-over-year Underlying results 1) See note on non-GAA
Slide 38: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations QUARTERLY TRENDS $s in millions, except share, per share and ratio data 1Q24 Change 1Q24 4Q23 1Q23 4Q23 1Q23 $ % $ % Noninterest income, Underlying: Noninterest income (GAAP) A $517 $500 $485 $17 3% $32 7% Less: Notable items 3 — — 3 100 3 100 Noninter
Slide 39: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q24 Change 1Q24 4Q23 1Q23 4Q23 1Q23 $/bps % $/bps % Operating leverage: Total revenue (GAAP) C $1,959 $1,988 $2,128 ($29) (1.41%) ($169) (7.96%) Less: Noninterest expense (GAAP) E
Slide 40: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations QUARTERLY TRENDS $s in millions, except share, per share and ratio data 1Q24 Change 1Q24 4Q23 1Q23 4Q23 1Q23 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) Q
Slide 41: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q24 Change 1Q24 4Q23 1Q23 4Q23 1Q23 $/bps % $/bps % Card fees, Underlying: Card fees (GAAP) $86 $70 $72 $16 23% $14 19% Less: Notable items 3 — — 3 100 3 100 Card fees, Underlying
Slide 42: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q23 2Q23 Noninterest income, Underlying: Noninterest income (GAAP) A $492 $506 Less: Notable items — — Noninterest income, Underlying (non-GAAP) B $492 $506 Total revenue, Underly
Slide 43: Non-GAAP financial measures and reconciliations - CET1 adjusted for AOCI opt-out removal
Non-GAAP financial measures and reconciliations - CET1 adjusted for AOCI opt-out removal $s in millions, except share, per share and ratio data 1Q24 4Q23 CET1 Ratio adjusted for AOCI opt-out removal CET1 capital $ 18,090 $ 18,358 Less: AFS securities - AOCI 1,687 1,511 HTM securities - AOCI(1) 810 8
Slide 44: Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q24 4Q23 1Q23 Net income available to common stockholders, Underlying: Net income available to common stockholders (GAAP) $304 $159 $488 Add: Not
Slide 45: Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core $s in millions, except share, per share and ratio data QUARTERLY TRENDS 1Q24 4Q23 1Q23 Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) $220,7
Slide 46: Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core* 1Q 2024 (GAAP) 1Q 2024 Notables 1Q 2024 (Non-GAAP) Commercial Consumer Legacy Private (3) Private Legacy Private Other Non-Core Legacy Non-Core Non-Core Total $s in millions Banking Banking(1) Core(2) Bank Bank Core B
Slide 47: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q1 2024 Earnings Presentation on 6ix