Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (September 2016)
44 slides from Citizens Financial's debt investor presentation, September 2016
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation September 2016
Slide 2: Important Information and GAAP/Non-GAAP Information
Important Information and GAAP/Non‐GAAP Information 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. These statements often include the words
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 13th largest U.S. retail bank holding company with attractive Attractive, client- demographics in core markets centric franchise Attractive business mix with growing and profitable commercial with scale business complementing strong consumer business Client-centric mo
Slide 6: Strong and experienced board and leadership team
We are led by a strong and experienced board & leadership team Since January 2015, have attracted or promoted from within more than 28% 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
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension Rank(2) Top 5 deposit market share in 9 of 10 largest MSAs(1) Assets: $145.2 billion #13 Loans: $103.6 billion #11 Deposits: $106.3 billion #12 Manchester, NH: #1 Rochester, NY: #4 Branches: 1,200 #12
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 Commercial Real Estate Credit/Debit Card Deep client Extensive Franchise Finance Wealth Management + relationships product set 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 11.5%(1) on a fully phased-in Basel III basis Strong asset quality performance with core net charge-offs of 20 bps(1,2) in 2Q16 Robust deposit franchise with $86.5 billion of
Slide 10: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers 2Q16 total capital(1) 14.9% 14.7% 14.7% 14.3% Publicly stated CET1 targets(3) 13.9% 13.9% 13.6% 13.6% 13.4% 12.7% 12.7% CFG ~11% BBT 9.0-10.0% FITB 9.0-9.5% KEY <9.5% MTB <10.0% 11.5% 11.0% 10.6% 11.0% 11.1% 10.5% PNC 8.0-9.0% 9.9% 10.0% 10.4%
Slide 11: Improving financial performance
Improving financial performance 10
Slide 12: Specific initiatives to support our strategy
We have developed specific initiatives to support our strategy Balance Sheet Improved Continued Commercial Growth/Optimization Consumer Bank Banking Momentum Capital-Mix Normalization Reenergize Household growth Build out Mid-corporate & Target 6-8% average loan Reposition Auto Specialty ver
Slide 13: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 2Q16 Initiative Commentary Status Retail checking HHs up QoQ and YoY with new checking; HH first-year attrition improvements. Deposits up 3% Reenergize household growth and services charges up 5% YoY. Application and origination volumes up 20% and 42% QoQ
Slide 14: Continuous improvement mindset: TOP Programs
Have developed continuous improvement mindset: TOP Programs Tapping Our Potential (TOP) programs driving revenue growth and expense efficiencies TOP I TOP II TOP III Launched first half 2014 Launched mid 2015 Taking shape – emphasis on expenses Achieved $200 million annual cost On track to deliver $
Slide 15: Continuing to drive balance sheet and revenue momentum in 2016
Continuing to drive balance sheet and revenue momentum in 2016 2Q16 vs. 2Q15 A scaled platform well-positioned to drive value Strong loan growth Growing revenues faster Higher NIM expansion (Average total loan growth) (Revenue growth(1,2)) (Net interest margin change) 7.4% 475 bps 7.1% above peers 1
Slide 16: Expense control and improving returns
With continued focus on expense control and improving returns 2Q16 vs. 2Q15 Well-controlled expenses Strong operating leverage Efficiency improvement (Adjusted noninterest expense(1,2) change) (YoY Adjusted Operating Leverage(1,3)) (Adjusted efficiency ratio(1,3) change) 325 bps 4.2% 232 bps (34) bp
Slide 17: Net interest margin improved in 2H15, sustain in 2016
CFG net interest margin improved in 2H15, sustain in 2016 Focusing on optimizing asset growth and minimizing cost of deposits Lower net interest margin compression 2.88% 2.86% 2.87% 2.94% 2.88% 12 bps better than peers 2.86% 2.84% 2.72% 2.76% 2.77% Improving trend 2Q15 3Q15 4Q15 1Q16 2Q16 CFG Peer
Slide 18: Loan yield and deposit-cost initiatives
Loan yield and deposit-cost initiatives Evaluating and refining targeted growth opportunities to drive risk-adjusted returns Loan portfolio mix strategies Deposit-gathering strategies Investing to drive growth in higher-return Improving advertising strategies through analytics with categories su
Slide 19: Positioned for rising rates
We remain positioned for rising rates… …but also see plenty of opportunity to further 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 8.5% ─ ~65-70% of asset sensitiv
Slide 20: Capital/funding and liquidity
Capital/funding and liquidity 19
Slide 21: Stronger capital than peers
Stronger capital than peers Total capital ratio Increased quarterly dividends in 2Q16 by 20% In 2015, paid $221 million in dividends and repurchased 15.3% 15.4% 15.3% 15.1% 14.9% $500 million in common stock 130 bps ─ Dividend payout ratio of 26% above peers ─ Total common payout ratio of 85% 13
Slide 22: 2016 DFAST minimum stressed capital levels 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 23: Consolidated average balance sheet
Consolidated average balance sheet 2Q16 change from Highlights $s in billions 2Q16 1Q16 2Q15 1Q16 2Q15 $ % $ % Linked quarter: Investments and interest bearing Total earning assets up $3.3 billion, or 3%, with loan deposits $ 26.0 $ 25.5 $ 27.1 $ 0.5 2 % $ (1.1) (4) % growth of $2.4 billion, or 2%
Slide 24: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 90% U.S. Agency MBS $25.0 2.63% $24.0 2.31% $0.9 4.29% 2.33% 4% AAA-rated non-agency Total HTM $1.3 3.83% $0.9 $1.1 5.39% $4.3 2.46% $3.9 2.18% 18% of total earning assets, in line with peers $0.6 5.03
Slide 25: Solid deposit base provides low-cost funding
Solid deposit base provides attractive, low-cost funding $98.8 billion 2009 average deposits $104.0 billion 2Q16 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 7% Demand 18% 10% 26% Term 30% Checking 16% with Interest 39% 18% Savings & Checking with 35% Money Market Inte
Slide 26: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities(1) 17.9% 16.7% 14.7% 14.7% 13.8% 13.0% 12.8% 10.7% 10.3% 9.9% 8.5% PNC FITB USB KEY BBT Peer Avg CFG STI MTB CMA RF FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subord
Slide 27: Risk management
Risk management 3% Citizens Financial Group, Inc.” 26
Slide 28: Diversified and granular loan mix
Diversified and granular loan mix $54.0 billion $49.6 billion 2Q16 retail portfolio 2Q16 commercial portfolio Business Non-Core Out of Banking0.3% Other Out of 25% footprint(1,2) Leases 33% Education Finance 3% 6% footprint 2% Home Credit Cards 10% 15% Midwest 8% Equity 12% 3% 31% Midwest 33% Mid-At
Slide 29: 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 30: Credit expected to remain favorable
Credit expected to remain favorable Credit costs gradually normalizing with modest reserve build to fund continued loan growth Allowance metrics stable NCOs stable, comparable to peer average (Net charge-off ratio) 1.24% 1.23% 1.23% 1.21% 1.20% 0.33% 0.36% 0.35% 0.31% 0.31% 1.10 x 1.12 x 1.10 x 1.09
Slide 31: Core retail portfolio
Core retail portfolio Highlights 2Q16 $52.1 billion core retail portfolio Weighted-average core FICO score of 759 by Product type by Geography (1) 62% of the retail portfolio has a FICO score Education Finance Other of > 750 Out of Footprint Cards 10% 2% New England Core Mortgage – average por
Slide 32: Core home equity portfolio
Core home equity portfolio(1) Highlights 2Q16 $14.4 billion HELOC 2Q16 $2.2 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 32% 2Q16 HELOC originations of $1.1 billion 49%
Slide 33: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of June 30, 2016 In no single year is the maturing population balance greater 2013 – $668 million 2014 – $899 million 2015 – $1.26 billion than $1.7 billion 2% 4% 3% 3% 2% Between 2016 and 2018, $3.4 billion ($3.3 billion core and $9
Slide 34: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 2Q16 $13.6 billion core mortgage portfolio Jumbo mortgages originated primarily within (1) (1) by Refreshed CLTV by Refreshed FICO the Bank’s lending footprint <600 600-649 90-100% 100%+ 2% 3% Predominately in-footprint with a 80-89% 1% 3% 650-699 weig
Slide 35: Core education finance portfolio overview
Core education finance portfolio overview Highlights 2Q16 $5.2 billion core education finance portfolio Core education finance portfolio average FICO score of 774 and (1) by Refreshed FICO by Segment co-sign rate of 52% Acquired <650 650-699 portfolios InSchool 95% of InSchool loans co-signed wi
Slide 36: Auto portfolio credit metrics
Auto portfolio credit metrics $s in billions Highlights(1) 2Q16 $14.1 billion Auto portfolio Auto Finance portfolio – purchase only, no (2) by FICO score(1,2) by LTV leasing, weighted-average FICO score ≤ 600 601-649 ≥ 120 ≤ 80 of 735 ≥ 800 5% 12% 15% 8% 2Q16 originations of $1.8 billion with 22
Slide 37: Commercial portfolio overview
Commercial portfolio overview Highlights 2Q16 $49.6 billion commercial portfolio Asset quality relatively stable and has reached by Industry Sector (1) pre-crisis levels Overall credit risk is moderate and compares well with All Other(3) peers 14% Real Estate Lessors 20% – $21.6 billion shared n
Slide 38: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 2Q16 $9.5 billion Commercial Real Estate Line of Business (1) Strategy to uptier portfolio to larger, more by Facility Type by Property Type well-capitalized institutional and upper middle- Land market borrowers Construction 1% Retail – I
Slide 39: Oil & Gas portfolio overview
Oil & Gas portfolio overview 2Q16 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 $335 million of corporate aircraft leases arising from (1) Les s pri ce-s ens i ti ve tota
Slide 40: Non-core portfolio overview
Non-core portfolio overview $s in billions Non-core assets Highlights $20.5 $20.5 billion of assets identified as Non-core in June 2009; only $17.3 $2.0 billion remain ─ Down 65% from end of 2012 $13.4 ─ Represents ~2% of total loan portfolio $8.4 SBO portfolio 76% home equity loans and 24% HELO
Slide 41: Appendix
Appendix 3% Citizens Financial Group, Inc.” 40
Slide 42: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions FOR THE QUARTER FOR THE QUARTER ENDED JUNE 30, ENDED JUNE 30, 2016 Change 2016 2015 from 2015 Noninterest income, excluding special items: Noninterest income (GAAP) $355 $360 Less: Special items — — Noni
Slide 43: Non-GAAP reconciliation table
Non-GAAP reconciliation table (Excluding restructuring charges and special items) $s in millions FOR THE QUARTER FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED JUNE 30, ENDED JUNE 30, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DEC
Slide 44: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
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