Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2024 Earnings Presentation
46 slides from Citizens Financial's earnings presentation, Oct 16, 2024
Slide 1: 3Q24 Financial Results
3Q24 Financial Results October 16, 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: 3Q24 GAAP summary
3Q24 GAAP summary Q/Q Y/Y $s in millions 3Q24 2Q24 3Q23 $/bps % $/bps % Net interest income $ 1,369 $ 1,410 $ 1,522 $ (41) (3) % $ (153) (10) % Noninterest income 532 553 492 (21) (4) 40 8 Total revenue 1,901 1,963 2,014 (62) (3) (113) (6) Noninterest Expense 1,259 1,301 1,293 (42) (3) (34) (3) Pre-
Slide 4: 3Q24 Underlying financial summary
3Q24 Underlying financial summary(1) Q/Q Y/Y $s in millions 3Q24 $/bps % $/bps % Net interest income $ 1,369 $ (41) (3)% $ (153) (10)% Noninterest income 534 (15) (3) 42 9 Total revenue 1,903 (56) (3) (111) (6) Noninterest expense 1,248 (17) (1) (23) (2) Pre-provision profit 655 (39) (6) (88) (12) P
Slide 5: 3Q24 Underlying financial performance detail
3Q24 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 $1,356 $41.2 $1,397 $(28) $1,369 Noninterest income 525 8.5 534 — 534 Total revenue 1,881 49.7 1,931 (28) 1,903 Nonint
Slide 6: 3Q24 Overview
3Q24 Overview(1) Underlying PPNR drivers ■ Underlying EPS of $0.79; ROTCE of 9.7% $s in millions ■ PPNR of $655 million – NII down 2.9% QoQ driven by a 10 bp decline in 3Q24 QoQ NIM primarily related to the impact of forward NII $ 1,369 (2.9)% 3Q24 Underlying starting swaps results – Fees down 2.7%
Slide 7: Net interest income
Net interest income NII and NIM Linked Quarter $s in millions, except earning assets ■ NII down 2.9%, primarily reflecting lower NIM and slightly $203.1B lower interest-earning assets $199.6B $200.1B $198.5B $197.2B – NIM of 2.77%, down 10 bps QoQ, given the impact of forward-starting swaps and low-
Slide 8: Noninterest income
Noninterest income(1) Noninterest Income details Linked Quarter ■ Underlying noninterest income decreased 2.7% with the following key $ business drivers: $s in millions 3Q24 2Q24 3Q23 Q/Q Y/Y – Capital markets fees decreased $40 million, largely driven by Service charges and fees $ 109 $ 106 $ 105 $
Slide 9: Noninterest expense
Noninterest expense(1) Underlying expense down 1.3% QoQ reflecting expense discipline while strategically investing $ Linked Quarter $s in millions 3Q24 2Q24 3Q23 Q/Q Y/Y ■ Underlying noninterest expense of $1.2 billion, down 1.3% Salaries & employee benefits $ 643 $ 637 $ 654 $ 6 $ (11) Equipment &
Slide 10: Loans and leases
Loans and leases Period-end loans stable QoQ with Core loan growth offset by Non-Core run off Period-end loans and leases Linked Quarter $s in billions ■ Period-end loans broadly stable with Non-Core portfolio run off of $1.0 billion offset by Core loan growth $149.7 $146.0 $143.2 – Private Bank gro
Slide 11: Deposit performance and cost of funds
Deposit performance and cost of funds Strong growth in franchise deposits driven by the Private Bank 3Q24 Period-end deposits Linked Quarter $s in billions ■ Period-end deposits down 1%, driven by a reduction in higher- $178.2 $177.3 $176.4 $176.4 cost Treasury deposits, partially offset by Private
Slide 12: Highly diversified and retail-oriented deposit base
Highly diversified and retail-oriented deposit base $175.2B Period-end deposits Business mix (As of 9/30/24) Product mix Wealth 1% Citizens Business Access Banking Term 6% 12% 14% NIB 21% Commercial 26% Savings 10% Citizens Access Savings 5% Money Market Checking 31% Branch Treasury/ Other With Inte
Slide 13: Credit quality overview
Credit quality overview Credit provision expense; Nonaccrual loans $s in millions net charge-offs $s in millions 179% 170% 157% 151% 136% 0.50% 0.52% 0.54% 0.40% 0.46% $1,687 $1,469 $1,527 $182 $184 $192 $1,364 $172 $171 $171 $171$181 $172 $1,296 $616 $153 $588 $578 $581 $590 $891 $939 $1,071 $715 $
Slide 14: Allowance for credit losses
Allowance for credit losses Allowance for credit losses CRE General Office reserve $s in millions 2Q24 3Q24 $2,318 $2,318 $2,308 $2,306 $2,286 Balance ($B) $ 3.3 $ 3.2 ACL ($MM; % coverage) $ 369 11.1 % $ 382 12.1 % 1.96% 1.99% 1.91% 1.88% 1.84% Cumulative NCOs* ($MM) $ 319 $ 364 *Cumulative losses
Slide 15: Strong capital position
Strong capital position Highlights $s in billions (period-end) 3Q23 4Q23 1Q24 2Q24 3Q24 Basel III basis(1)(2) ■ 3Q24 CET1 ratio of 10.6%(1) compares with 10.7% in 2Q24 Common equity tier 1 capital $ 18.4 $ 18.4 $ 18.1 $ 18.1 $ 17.9 – 9.2% CET1 ratio adjusted for AOCI opt-out removal Risk-weighted as
Slide 16: Capital level remains strong relative to peers
Capital level remains strong relative to peers ■ Well positioned for changing regulatory environment and uncertain macro environment ■ CET1 ratio under current rules of 10.6%(1), and 9.2% adjusted for AOCI opt-out removal; among the strongest within the peer group – We continue to maintain a target
Slide 17: Well positioned for the future
Well positioned for the future Consumer Commercial Private Bank Transformed franchise Best positioned Building a premier private bank Low-cost branch-based deposits ■ Focused client coverage model on Reached break-even mid-3Q; middle market, industry verticals, Added SoCal team & 2 PB offices +7% fi
Slide 18: 4Q24 outlook vs. 3Q24
4Q24 outlook vs. 3Q24 3Q24 4Q24 Underlying(1) Underlying outlook ■ Up 1.5-2.5% Net interest income $1,369MM ■ NIM up ~5 basis points; spot loans up slightly Noninterest income $534MM ■ Up mid to high single digits Noninterest expense $1,248MM ■ Up ~2% ■ Broadly stable Net charge-offs $192MM; 54 bps
Slide 19: 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 20: Appendix
Appendix
Slide 21: 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 ê1% $173.7 $174.1 stable ê4 bps 0.94% $143.1 0.88% $142.0 0.78% 0.74% 2Q24 3Q24 2Q24 3Q24 2Q24 3Q24 Pre-provision profit Net income available to Return on average
Slide 22: 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 ê6% ê1% ê10 bps $176.5 $174.1 $150.8 $142.0 1.08% 0.88% 0.84% 0.74% 3Q23 3Q24 3Q23 3Q24 3Q23 3Q24 Net income available to Return on average tangible Pre-provision
Slide 23: Meaningful NIM improvement over the medium term
Meaningful NIM improvement over the medium term Medium-term NIM target 3.25 to 3.40% Graphic is illustrative; not to scale Factors supporting 3.25% - 3.40% NIM • Swaps and Non-Core run off • Steadily improving balance sheet mix 3.40% Higher end of range • Fed funds terminal range of 3.00% - 3.75% •
Slide 24: Protecting NII and reducing earnings volatility through economic cycles
Protecting NII and reducing earnings volatility through economic cycles ■ Receive-fixed cash flow swaps represent the primary tool to manage overall asset sensitivity – Will opportunistically add swaps to increase protection to downside in rates in 2026 and beyond ■ Slightly asset sensitive to a gra
Slide 25: BSO actions to further strengthen capital & liquidity, improve returns
BSO actions to further strengthen capital & liquidity, improve returns $s in billions Non-Core portfolio Commercial BSO ■ Non-Core retail loan portfolio of $7.9 billion at 9/30/24 ■ Originations are highly selective, with a focus on multi- product relationships that deliver a higher risk-adjusted –
Slide 26: Strong liquidity and improving funding profile
Strong liquidity and improving funding profile Increasing structural long-term debt Maintaining a high level of liquidity $s in billions; period-end while reducing shorter-term borrowings $s in billions $13.4 $53.0 $11.9 $12.5 $50.2 $52.0 $52.8 $10.2 $41.1 $41.7 $42.4 $40.0 27% 27% 27% 26% $3.8 $7.8
Slide 27: AOCI accretion
AOCI accretion Projected accretion to TCE and CET1 adjusted for AOCI opt-out removal(1) Accretes to CET1(2) TCE CET1(2) 9/30/2024 $(0.6) $(0.3) $(1.9) $(2.9) $(2.3) 12/31/2025 $(0.2) $(0.3) $(1.7) $(2.2) $(2.1) 12/31/2026 $(0.3) $(1.6) $(2.0) $(2.0) ~32% ~13% Burn-off by YE2026 (3) Swaps Pension Sec
Slide 28: $71.8B Commercial credit portfolio
$71.8B Commercial credit portfolio Diverse and granular portfolio Commercial portfolio risk ratings(4) $s in billions % of ($ in billions) Balances total CFG C&I $77.5 $71.9 $71.8 Finance and Insurance B- and lower 7% 8% 8% Capital call facilities $ 5.9 4% B+ to B 17% 18% Other Finance and Insurance
Slide 29: Commercial Real Estate - $5.4B Office portfolio: well diversified
Commercial Real Estate - $5.4B Office portfolio: well diversified Property type $3.2B General Office class & location Life Sciences $1.0B 19% CBD Class A Suburban Class B 15% 28% Credit Tenant CBD Class B $1.2B 22% 10% Suburban Class A 40% General Office 59% $3.2B Suburban Class C 2% CBD Class C 5%
Slide 30: $69.8B Retail credit portfolio
$69.8B Retail credit portfolio Retail loans(1) High quality, diverse portfolio Other retail ■ Mortgage – FICO ~785 Education - 7% Residential – Weighted-average LTV of ~52% refinance 11% mortgage ■ Home equity – FICO ~760 – ~33% secured by 1st lien Education - 4% in school – ~99% CLTV less than 80%
Slide 31: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type September 30, 2024 June 30, 2024 Loans and Loans and Allowance Coverage Allowance Coverage $s in millions Leases Leases Commercial and industrial(1)(2) $ 43,825 $621 1.42 % $ 43,623 $690 1.58 % Commercial real estate 27,983 730 2.61 28,311 73
Slide 32: Delinquency by product type
Delinquency by product type September 30, 2024 (%) June 30, 2024 (%) 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) 99.36 % 0.12 % 0.01 % 0.01 % 0.50 % 99.28 % 0.06 % 0.04 % 0.02 % 0.60 % Commer
Slide 33: 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 items. In addition, second quarter 2024 includes a notable item for an industry-wide FDIC special assessmen
Slide 34: 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 35: Notes continued
Notes continued Notes on slide 17 - Well positioned for the future 1) Compounded annual growth rate is calculated using 2024 YTD annualized results. Notes on slide 18 - 4Q24 outlook vs. 3Q24 1) See note on non-GAAP financial measures. 2) See general note d). Notes on slide 21 - Linked-quarter Underl
Slide 36: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations QUARTERLY TRENDS $s in millions, except share, per share and ratio data 3Q24 Change 3Q24 2Q24 3Q23 2Q24 3Q23 $ % $ % Noninterest income, Underlying: Noninterest income (GAAP) A $532 $553 $492 ($21) (4%) $40 8% Less: Notable items (2) 4 — (6) (150) (2)
Slide 37: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 3Q24 Change 3Q24 2Q24 3Q23 2Q24 3Q23 $/bps % $/bps % Operating leverage: Total revenue (GAAP) C $1,901 $1,963 $2,014 ($62) (3.23%) ($113) (5.67%) Less: Noninterest expense (GAAP) E
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 3Q24 Change 3Q24 2Q24 3Q23 2Q24 3Q23 $/bps % $/bps % Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) Q
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 3Q24 Change 3Q24 2Q24 3Q23 2Q24 3Q23 $/bps % $/bps % Card fees, Underlying: Card fees (GAAP) $93 $92 $74 $1 1% $19 26% Less: Notable items 6 4 — 2 50 6 100 Card fees, Underlying (n
Slide 40: 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 4Q23 Noninterest income, Underlying: Noninterest income (GAAP) A $517 $500 Less: Notable items 3 — Noninterest income, Underlying (non-GAAP) B $514 $500 Total revenue, Underly
Slide 41: Non-GAAP 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 3Q24 2Q24 CET1 Ratio adjusted for AOCI opt-out removal CET1 capital $ 17,941 $ 18,086 Less: AFS securities - AOCI 1,181 1,716 HTM securities - AOCI(1) 776 7
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 3Q24 Change 3Q24 2Q24 3Q23 2Q24 3Q23 $/bps % $/bps % Total Retail loans - at period-end $69,824 $69,907 $72,289 ($83) —% ($2,465) (3%) Less: Non-core retail loans - at period-end 7
Slide 43: Non-GAAP 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 3Q24 2Q24 3Q23 Net income available to common stockholders, Underlying: Net income available to common stockholders (GAAP) $344 $357 $400 Add: Not
Slide 44: Non-GAAP 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 3Q24 2Q24 3Q23 Return on average total tangible assets and return on average total tangible assets, Underlying: Average total assets (GAAP) $218,5
Slide 45: Non-GAAP reconciliations excluding Private Bank & Non-Core
Non-GAAP financial measures and reconciliations excluding Private Bank & Non-Core* 3Q24 (GAAP) 3Q24 Notables 3Q24 (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 Bank Net i
Slide 46: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q3 2024 Earnings Presentation on 6ix