Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Credit Suisse 2016 Financial Services Forum
37 slides from Citizens Financial's conference presentation, Feb 10, 2016
Slide 1: Credit Suisse 2016 Financial Services Forum
Credit Suisse 2016 Financial Services Forum February 10, 2016 Eric Aboaf, Chief Financial Officer
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 Citizens is an attractive franchise with great potential We have a plan to deliver improved performance for all stakeholders and are executing well against the plan ─ Have developed new initiatives to offset environmental headwinds ─ Consistently upgrading talent Our financial progres
Slide 4: Our financial turnaround plan had several elements
Our financial turnaround plan had several elements Key elements of ’13-’16 plan Status Grow balance sheet, Consumer: Auto, Student, Mortgage net interest income Commercial: Middle Market, Mid-Corporate & on track Specialty Verticals, CRE, Franchise Finance Grow fee business, Consumer: Wealth, Mort
Slide 5: Revenue and balance sheet growth compares well vs. peers
Revenue and balance sheet growth compares well vs. peers FY15 vs. FY14 A scaled platform well-positioned to drive value Strong loan growth Growing revenues faster Lower NIM compression (Average total loan growth) (Core revenue growth(1)) (Adjusted net interest margin change(1)) CFG Peer average 8% 3
Slide 6: Expense control and key metrics improvement compares well with peers
Expense control and key metrics improvement compares well with peers FY15 vs. FY14 Well-controlled expenses Efficiency improvement Accelerating profitability (Core noninterest expense(1) change) (Core efficiency ratio(1) change) (Core net income available to common stockholders(1) change) 10.1% 224
Slide 7: FY2016 outlook calls for continued strong growth
FY2016 outlook calls for continued strong growth (1)(2) (1) Adjusted FY2015 guidance vs. Adjusted FY2014 Adjusted FY2015 Actual Results vs. Adjusted FY2014 6% average earning asset growth with 8% average loan Balance sheet Target 5-7% earning asset growth growth across both consumer and commerci
Slide 8: Investments in fee businesses should accelerate growth
Investments in fee businesses should accelerate growth Adjusted FY2015(1) FY2016 expectations vs. Adjusted FY2015(1,2) Average earning assets $122.9 billion 5-6% average earning asset growth Balance sheet Average loans $96.2 billion 6-8% average loan growth growth Average deposits $99.2 bi
Slide 9: Loan growth leading expansion
Loan growth leading expansion $s in billions Loan Category (1) FY15 FY15 vs FY14 2016 Outlook Growth rate trend Highlights Commercial Industry Verticals $3.0 35% strong growth Expect Commercial momentum to Franchise Finance 3.2 23% strong growth continue Other(2) 2.7 23% stable ─ Strongest growth
Slide 10: CFG 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 3.01% 2.98% 2.96% 2.94% 2.96% 2 bps better than peers 2.80% 2.77% 2.77% 2.76% 2.72% Improving trend 4Q14 1Q15 2Q15 3Q15 4Q15 CFG Peer
Slide 11: 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 12: Project strong growth in net interest income driven by asset growth, NIM
Project strong growth in net interest income driven by asset growth, NIM Net interest income growth 2014-2015 6.1% 1.5% (1.2)% (1.9)% (1.5)% $3,301 $3,402 2014 Earning asset Pay‐fixed swap Loan mix/ Deposit Term & sub- 2015 growth benefit yields costs (1) debt issuance and other NIM% 2.83% 0 bps +4
Slide 13: Investments in fee businesses should accelerate growth
Investments in fee businesses should accelerate growth Adjusted FY2015(1) FY2016 expectations vs. Adjusted FY2015(1,2) Average earning assets $122.9 billion 5-6% average earning asset growth Balance sheet Average loans $96.2 billion 6-8% average loan growth growth Average deposits $99.2 bi
Slide 14: CFG noninterest income
CFG noninterest income $s in millions Highlights FY15 vs 4Q15 vs Growth 2016 Growth rate 2016 outlook reflects improving trends in Noninterest income category FY15 FY14 (1) 4Q14 trend Wealth, Capital Markets, Mortgage and Treasury Solutions Service charges and fees $ 575 2% 8% moderate growth Tr
Slide 15: Noninterest income
Noninterest income $s in millions Noninterest income growth 2014-2015 2.7% 1.3% (1.7)% $1,390 $1,422 Adjusted 2014(1) Noninterest income Branch sale and Estimated Chicago 2015 growth mortgage portfolio Divestiture Impact sale gain Noninterest income outlook 2015-2016 6-8% (1%) 5-7% $1,422 growth ran
Slide 16: Target continued positive operating leverage, efficiency improvements
Target continued positive operating leverage, efficiency improvements Adjusted FY2015(1) FY2016 expectations vs. Adjusted FY2015(1,2) Average earning assets $122.9 billion 5-6% average earning asset growth Balance sheet Average loans $96.2 billion 6-8% average loan growth growth Average de
Slide 17: CFG core efficiency improving vs peers
CFG core efficiency improving vs peers(1) Efficiency improvement Core efficiency improvement driven by positive (Core efficiency ratio(1)) operating leverage Both revenue and expense initiatives contributing 67% 69% 67% 66% 66% ─ Non-revenue producing FTEs down 122 bps 1.1% from YE14 improvement
Slide 18: Incremental revenue and efficiency initiatives (Top II)
Incremental revenue and efficiency initiatives (Top II) On track to deliver benefit of $90-115 million in 2016; 60/40 revenue/expense split 2016 targeted pre-tax benefit ($s in millions) Category Name Description Revenue Expense Progress to date Operations Refine operating model to simplify $25-$30
Slide 19: Noninterest expense remains well-controlled
Noninterest expense remains well-controlled $s in millions Adjusted noninterest expense(1) trend 2014-2015 0.8% 0.6% (3.0)% 1.4% 1.1% (1.3)% $3,223 3.9% $3,209 Adjusted (1) Strategic Other salaries Equipment Outside Efficiency Chicago Adjusted (1) Underlying expense growth 2014 initiatives & emplo
Slide 20: FY2016 outlook
FY2016 outlook Adjusted FY2015(1) FY2016 expectations vs. Adjusted FY2015(1,2) Average earning assets $122.9 billion 5-6% average earning asset growth Balance sheet Average loans $96.2 billion 6-8% average loan growth growth Average deposits $99.2 billion 5-7% average deposit growth Net
Slide 21: 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, near peer average (Net charge off ratio) 1.28% 1.27% 1.24% 1.23% 1.23% 0.35% 0.33% 0.27% 0.31% 0.31% 1.10 x 1.12 x 1.10 x 1.05 x 1.02 x
Slide 22: FY2016 outlook
FY2016 outlook Adjusted FY2015(1) FY2016 expectations vs. Adjusted FY2015(1,2) Average earning assets $122.9 billion 5-6% average earning asset growth Balance sheet Average loans $96.2 billion 6-8% average loan growth growth Average deposits $99.2 billion 5-7% average deposit growth Net
Slide 23: Stronger capital than peers
Stronger capital than peers In 2015, paid $221 million in dividends and Total capital ratio (1) repurchased $500 million in common stock ─ Dividend payout ratio of 26% 15.8% 15.5% 15.4% 15.3% 15.3% ─ Total payout ratio of 86% 160 bps above peers ─ Total payout yield of 6.8%(3) 14.2% 13.8% 13.6% 13
Slide 24: Key messages
Key messages Citizens is an attractive franchise with great potential ─ We have a plan to become a top-performing regional bank ─ To date, we are executing well against that plan ─ We are mindful of building it ‘right’ for the long term while delivering tangible financial improvement near term 2
Slide 25: Appendix
Appendix 3% Citizens Financial Group, Inc.” 24
Slide 26: Estimated impact of 2016 prospective Card Reward Accounting Change
Estimated impact of 2016 prospective Card Reward Accounting Change The following reflects 2016 growth-rate expectations pre and post the estimated impact of a 2016 prospective Card Reward Accounting Change*, which would have the effect of reducing Card fees and Other operating expense by an estimate
Slide 27: Diversified and granular loan mix
Diversified and granular loan mix $52.8 billion $46.2 billion 4Q15 retail portfolio(1) 4Q15 commercial portfolio(2) Business Non-Core Other Non-Core 29% Other Banking 0.4% 29% Other Education Finance 2%4% Leases 6% Credit Cards 7% Home 12% Midwest 12% Midwest 9% 3% 33% Equity 32% Mid- Atlantic CRE (
Slide 28: 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 29: Core retail portfolio
Core retail portfolio Highlights 4Q15 $50.8 billion core retail portfolio Weighted-average FICO score of 759 by Product type by Geography 61% of the retail portfolio is > 750 Education Finance Other Core Mortgage – average portfolio FICO of Out of Footprint Cards 2% New England 8% 775 and LTV
Slide 30: Core home equity portfolio
Core home equity portfolio(1) Highlights 4Q15 $14.6 billion HELOC 4Q15 $2.7 billion HELOAN 51% of the portfolio is secured by 1st lien by Lien position by Lien position Weighted-average FICO of 765 84% has an LTV of less than 80% 2nd 1st 32% 48% 4Q15 HELOC originations of $1.5 billion 52% 2n
Slide 31: Commercial portfolio overview
Commercial portfolio overview Highlights 4Q15 $46.2 billion commercial portfolio Asset quality relatively stable and has reached pre- by Segment (1) crisis levels Oil & Gas(2) Overall credit risk is moderate and compares well 3% Technology 4% Transportation with peers 4% Food & Beverage 4% – $4.
Slide 32: Oil & Gas portfolio overview
Oil & Gas portfolio overview Highlights 4Q15 $1.6 billion Oil & Gas portfolio by Sub-Sector Oil & gas portfolio reflects exposure to six different subsectors: Integrated Reserve-Based Upstream (Non-RBL) Midstream 10% Lending (RBL) 3% Midstream 26% ~$700 million Downstream Downstream 24% most
Slide 33: 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; $17.3 only $2.3 billion remain ─ Down 59% from end of 2012 $13.4 ─ Represents ~2% of total loan portfolio $8.4 SBO portfolio 72% home equity loans and 28% HELO
Slide 34: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions FOR THE YEAR ENDED DECEMBER 31, QUARTERLY TRENDS 2015 Change 2015 2014 from 2014 4Q15 3Q15 2Q15 1Q15 4Q14 Net interest income, excluding special items: Net interest income (GAAP) $3,402 $3,301 Less: Spec
Slide 35: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions FOR THE YEAR ENDED DECEMBER 2015 31,Change 2015 2014 from 2014 Net Income, excluding restructuring charges and special items: Net income (GAAP) G $840 $865 Add: Restructuring charges and special items, n
Slide 36: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table (Excluding Chicago Divestiture) $s in millions FOR THE YEAR ENDED 2015 Change DECEMBER 31, from 2014 2015 2014 Adjusted net interest margin, excluding Chicago adjustment: Average interest earning assets (GAAP) $122,950 $116,187 Less: Estimated - Chicago adjustment - 516
Slide 37: Citizens Financial Group, Inc.
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