Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Bank of America Merrill Lynch Future of Financials Conference 2019
24 slides from Citizens Financial's conference presentation, Nov 5, 2019
Slide 1: Bank of America Merrill Lynch Future of Financials Conference
Bank of America Merrill Lynch Future of Financials Conference Malcolm Griggs Chief Risk Officer November 5, 2019 Exhibit 99.1
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 meaning of Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends are for
Slide 3: Summary of presentation
Summary of presentation Evolution of Risk Management Experienced Risk Management organization Strong risk management culture driving desired outcomes Risk Management priorities & achievements Current benefits and future opportunities Cybersecurity & retail fraud Credit Risk Management Enhanced monit
Slide 4: Evolution of Risk Management
Utilize data & technology in a more sophisticated way Transition to principles-based risk management Focus on capital allocation to drive enhanced returns Further develop teams of specialized experts & well-rounded bankers Evolution of Risk Management Rudimentary & siloed approach Technical credit,
Slide 5: Experienced Risk Management organization
Risk Architecture Steve Boras 31 years experience, CFG – 4 years Risk Administration David Berube 30 years experience, CFG – 13 years Commercial Banking Risk(1) Gary Aswad 35 years experience, CFG – 14 years Chief Credit Officer Rob Allen 36 years experience, CFG – 5 years Experienced Risk Managemen
Slide 6: Strong risk management culture driving desired outcomes
Strong risk management culture driving desired outcomes Strong culture helps achieve long-term growth, improve returns and create competitive advantage Driving desired outcomes Efficient & effective governance processes New initiatives thoroughly vetted Well-rounded bankers with risk expertise Innov
Slide 7: Data analytics and technology: current benefits and future opportunities
Current benefits Future opportunities Enhanced use of data analytics and new technologies to drive effectiveness & efficiency Improved retail fraud and bankruptcy prediction capabilities New sales conduct analytics and reporting platform Leveraging robotics to enhance Anti-Money Laundering operation
Slide 8: Improved alignment of risk and strategy to drive enhanced returns
Improved alignment of risk and strategy to drive enhanced returns Develop real-time tools to evaluate return on capital based on deal terms Improve time-to-market by enhancing the efficiency of governance and analysis Further advance partnership around strategic initiatives, M&A due diligence and in
Slide 9: Transition to principles-based risk practices
Current benefits Future opportunities Transition to principles-based risk practices Shift focus toward portfolio vs. transaction oversight Further enhance risk discipline and client selection and move away from “check the box” approach Simplify and streamline credit authority administration process
Slide 10: Other focus areas - cybersecurity and retail fraud
Other focus areas - cybersecurity and retail fraud Upgraded card and ATM security Implemented new fraud management platform, expanded text/email capabilities Re-engineered fraud processes, reducing number of platforms and leveraging automation Meaningful improvement in fraud-related losses Significa
Slide 11: Enhanced monitoring for proactive credit portfolio management
Enhanced monitoring for proactive credit portfolio management Early warning indicators monitored for signs of economic and portfolio stress with playbooks in place to anticipate and address a potential downturn Triggers and policy tightening actions established to respond to early signs of stress Ro
Slide 12: Credit risk management - diversified and granular loan mix
$61.1 billion 3Q19 retail portfolio $56.2 billion 3Q19 core commercial portfolio Credit risk management - diversified and granular loan mix Home Equity Indirect Auto Residential Mortgage Education Refi Credit Cards Other Non-Core Retail NCO% Retail NPL% Commercial NPL% Commercial NCO% CFG Peers CFG
Slide 13: Significant improvement in portfolio mix
Improved loan loss rates in both retail and commercial with excellent progress in reducing the non-core portfolio Significant improvement in portfolio mix See page 22 for notes and important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, including “Underlying”
Slide 14: Highly disciplined on credit
Highly disciplined on credit Weighted-average FICO score of ~765 ~75% collateralized ~80% of real estate portfolio is 1st lien Core mortgage – FICO ~790; CLTV of ~60% Core home equity – FICO ~765 51% 1st lien, CLTV of ~55% Highly granular and diversified portfolio in terms of geography, industry, as
Slide 15: Proactively managing areas of potential industry concern – Consumer unsecured
~50% of portfolio subject to merchant partner loss sharing arrangements Measured approach to growth & loan limits as we develop further expertise with the product Continue to improve our analytical suite of tools; focus on tightening higher-risk areas and enhancing pricing segmentation Real-time ass
Slide 16: Proactively managing areas of potential industry concern – Education
Core education finance portfolio weighted-average FICO score of ~780 and co-sign rate of ~50% Education refinance portfolio borrowers at origination have been employed ~6 years on average with: ~60% having advanced degrees 100% verified income Total organic refinance portfolio of $4.5 billion with w
Slide 17: Proactively managing areas of potential industry concern – Auto
Proactively managing areas of potential industry concern – Auto Took proactive action in 2017 to limit national footprint to larger multi-dealers by reducing states and eliminating small dealerships Limited exposure to higher-risk, longer-duration loans ~25% of portfolio 76- to 84-months; originatio
Slide 18: Proactively managing areas of potential industry concern – CRE
Proactively managing areas of potential industry concern – CRE Continued progress in uptiering portfolio to larger, more well-capitalized institutional and upper middle market borrowers Proactive approach to identifying and reacting to emerging trends Pulled back from Virginia, Maryland and Washingt
Slide 19: DFAST company-run stress results compare favorably to peers
DFAST company-run stress results compare favorably to peers Bank Holding Company-run severely adverse credit loss rate historically in-line or better than peer average; 2019 loss rate of 4.1% improved 50 bps relative to 2018(1) Company-run severely adverse stress loss rates 2014-2019 Expect “normal”
Slide 20: Current Expected Credit Loss (CECL) standard implementation
Current Expected Credit Loss (“CECL”) standard implementation Estimated 1/1/2020 day-1 cumulative impact of CECL implementation: Net increase to allowance for credit losses of ~30%-35%;~22-25 bp reduction of CET1 on a fully-phased in basis Expect an increase in retail reserves tied to longer-duratio
Slide 21: Key messages
Key messages Strong risk culture Strong Risk Management culture helps Citizens achieve long-term growth, improve returns and create competitive advantage Strong leadership team with an average of ~28 years of industry experience Investing in core capabilities Enhance use of data analytics and levera
Slide 22: Appendix
Appendix 3% Citizens Fanci Grup re
Slide 23: Notes on Key Performance Metrics and Non-GAAP Financial Measures
Notes on Key Performance Metrics and Non-GAAP Financial Measures See important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, at the beginning and end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and their
Slide 24: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Bank of America Merrill Lynch Future of Financials Conference 2019 on 6ix