Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q4 2018 Earnings Presentation
47 slides from Citizens Financial's earnings presentation, Jan 18, 2019
Slide 1: 4Q18 and 2018 Financial Results
4Q18 and 2018 Financial Results January 18, 2019 Exhibit 99.2
Slide 2: Forward-looking statements 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 Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends are forward-lookin
Slide 3: Table of contents
Table of contents page 4Q18 Highlights 4 Notable items detail 5 4Q18 Underlying financial summary 7 2018 Underlying financial summary 9 Underlying 2018 performance vs. guidance 19 FY2019 Outlook 20 1Q19 Outlook 21 New medium-term financial targets 24 Key Messages 25 Appendix 26
Slide 4: 4Q18 Highlights
Provision expense of $85 million; increased $7 million from relatively low 3Q18 levels Overall credit quality remains strong; NPLs of 68 bps of loans decreased 4% QoQ and 8% YoY NPL coverage ratio of 156% vs. 149% in 3Q18 and 142% in 4Q17 Allowance to loans and leases of 1.06% vs. 1.08% in 3Q18 and
Slide 5: Notable Items
Notable Items(1) Several items have been excluded from reported results to better reflect Underlying operating results.(1) Fourth quarter 2018 reported results include the impact of a further benefit resulting from December 2017 Tax Legislation partially offset by other notable items, primarily asso
Slide 6: 4Q18 GAAP financial summary
4Q18 GAAP financial summary Please 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 reconciliations to GAAP finan
Slide 7: 5.0% operating leverage
5.0% operating leverage Please 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 reconciliations to GAAP financial
Slide 8: 2018 vs 2017
2018 vs 2017 Net income available to common stockholders up $54 million, or 3%; diluted EPS of $3.52, up $0.27, or 8% Results include after-tax net reduction of $16 million, or $0.04 per share, from notable items in 2018 compared with $340 million benefit, or $0.67 per share, in 2017 NII up $359 mil
Slide 9: 2018 vs 2017: Underlying net income available to common stockholders
2018 vs 2017: Underlying net income available to common stockholders(1) up $410 million, or 32%; diluted EPS of $3.56, up $0.98, or 38% NII up $359 million, or 9%, reflecting 4% average loan growth and a 17 bp increase in net interest margin, reflecting higher rates and balance sheet optimization st
Slide 10: Net interest income
Highlights Net interest income Linked quarter: NII up $24 million, or 2% Reflects 2% average loan growth and improved NIM NIM of 3.22% up from 3.19% Reflects higher loan yields tied to higher rates, partially offset by increased deposit and funding costs Prior-year quarter: NII up $92 million, or 9%
Slide 11: Noninterest income
Note: Other income includes bank-owned life insurance and other income. Please 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 meas
Slide 12: Noninterest expense
$s in millions Noninterest expense Please 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 reconciliations to GAA
Slide 13: Average loans and leases
Average loans and leases Highlights YoY Loan Growth á 5% á 3% á 8% Total Core Total Core Retail Total Core Commercial Total core commercial loans and leases Total core retail loans (1) Note: Numbers may not foot due to rounding. Non-core loans are primarily liquidating loan and lease portfolios inco
Slide 14: Average deposits
Linked quarter: Total average deposits up $727 million, or 1% Largely reflects growth in savings, term deposits and demand deposits, partially offset by a reduction in money market accounts Citizens AccessTM raised ~$3.0 billion through quarter end with an average impact of $1.4 billion Total deposi
Slide 15: Strong credit-quality trends continue
Strong credit-quality trends continue Allowance for loan and lease losses to nonperforming loans and leases. $s in millions (1) Nonperforming loans Allowance for loan and lease losses Highlights Provision for credit losses, net charge-offs Provision for credit losses Total net c/os Net c/o ratio Cor
Slide 16: Capital and liquidity remain strong
Capital levels remain at the higher end of the range for regional peers 4Q18 CET1 ratio of 10.6% down 20 bps compared with 3Q18 largely tied to RWA growth and stock repurchases(1) LDR of 97.6% compares with 98.0% in 3Q18(2) Fully compliant with LCR(3) 2018 CCAR plan reflects further commitment towar
Slide 17: Strategic initiatives update
Strategic initiatives update(1) Balance Sheet Optimization Grow more attractive risk-adjusted return portfolios NIM up 17 bps YoY; ~5 bps of this is from our BSO efforts Core Education, personal unsecured and merchant financing up 24% YoY; average retail non-core loans down 25% YoY Industry Vertical
Slide 18: Making consistent progress against our financial targets
Making consistent progress against our financial targets Adjusted/ Underlying efficiency ratio(1) ~13 – 15% Key Indicators Adjusted/ Underlying ROTCE(1) EPS Adjusted/Underlying diluted EPS(1) Common equity tier 1 ratio(2) (3) Underlying results(1) Reported results(1) Adjusted results(1) Please see i
Slide 19: Underlying 2018 performance vs. guidance
Underlying FY2018 guidance vs. Underlying 2017(1)(2) Underlying FY2018 performance vs. guidance(1)(2) Underlying 2018 results Ex-FAMC vs. Underlying 2017(1) Results reflect strong execution against targets Please see important information on Key Performance Metrics and Non-GAAP Financial Measures, a
Slide 20: FY2019 outlook
FY2019 outlook Net interest income growth of ~5-6.5% NIM up low- to mid-single digit bps, reflecting benefit of balance sheet optimization Expense growth of ~5.5-6.25%; ~3-3.5% excluding the impact of FAMC/CFA Target ~1% improvement in efficiency ratio; ~1.5%+ excluding FAMC/CFA Target positive oper
Slide 21: 1Q19 outlook
1Q19 outlook Net interest income, net interest margin Noninterest expense Credit trends, tax rate 1Q19 Underlying outlook (excludes expected notable items) Capital, liquidity and funding Noninterest income $906 million $85 million provision expense 21.9% effective tax rate 4Q18 Underlying results(1)
Slide 22: Next phase: Aiming for Excellence
Next phase: Aiming for Excellence To help our customers, colleagues and communities reach their potential Objective is to be a top-performing bank that delivers well for all stakeholders Committed to excellence in every dimension Focused on long-term franchise value and consistent delivery of earnin
Slide 23: Looking forward
Looking forward Success will be driven by what got us here today Continued investments in our future Strong and experienced board and leadership team, best-in-class talent Commitment to excellence in every dimension Proven execution ability Focus on our customers Long-term positioning to deliver ear
Slide 24: New medium-term financial targets
New medium-term financial targets Medium-term financial targets Note: Please 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 measur
Slide 25: Key messages
Key messages Citizens continues to execute well and deliver for stakeholders Strong 4Q18 results with Underlying ROTCE of 14.1% up from 4.3% in 3Q13(1) Strong Underlying EPS growth of 38%, with operating leverage excluding FAMC of 5.0% YoY(1) Underlying efficiency ratio of 56.7%(1) Tangible book val
Slide 26: Appendix
Appendix Xx Citizens nancial Group,
Slide 27: Substantial progress prudently releveraging the balance sheet
Substantial progress prudently releveraging the balance sheet Good loan growth with rising yields(1) $s in billions Average loan balances. 2018 loan growth annualized for calculation. CAGR calculated from 2013 to 2018. Total loan losses as a percentage of the total loan book based on FRB Severely Ad
Slide 28: Highly disciplined on credit: diversified and granular core loan mix
Source: Company data. Portfolio balances as of December 31, 2018. Refreshed FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications reflects most recently available data. Consumer credit quality data as of November 30, 2018, as appl
Slide 29: Citizens vs peer group by total CRE loans
Citizens vs peer group by total CRE loans – 3Q18 Source: SNL and Call report/FR Y-9C as of 9/30/18. 29 $s in billions Although Citizens has grown at a faster pace than peers, our CRE portfolio remains underweight versus peers
Slide 30: Building fee capabilities organically and through targeted acquisitions
Commercial Capital & Global Markets Broaden capabilities in DCM, M&A, CRE New FX options/currency swaps platform and capabilities 2Q17 Western Reserve Partners acquisition added 30+ M&A professionals(1) Treasury Solutions Implementing best-in-class cash management system Investments in liquidity, pa
Slide 31: Rigorous TOP programs drive performance and self-funding
Rigorous TOP programs drive performance & allow self-funding of investments Continuously streamlining expense base to self-fund required investments 31 Focus on top-line growth and expense discipline drives positive operating leverage Upgraded talent – headcount relatively stable at ~18k over 5 year
Slide 32: Year-over-Year results
Year-over-Year results Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common equity á 10% Period-end loans $s in billions Period-end deposits $s in billio
Slide 33: Linked-quarter results
Linked-quarter results Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common equity ↓ 2% Period-end loans $s in billions Period-end deposits $s in billion
Slide 34: Full year results
Full year results Pre-provision profit $s in millions Return on average total tangible assets Net income available to common shareholders and EPS $s in millions, except per share data Return on average tangible common equity á 12% Period-end loans $s in billions Period-end deposits $s in billions á
Slide 35: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 35 $s in millions, except share, per share and ratio data
Slide 36: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 36 $s in millions, except share, per share and ratio data
Slide 37: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 37 $s in millions, except share, per share and ratio data
Slide 38: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 38 $s in millions, except share, per share and ratio data
Slide 39: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 39 $s in millions, except share, per share and ratio data
Slide 40: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 40 $s in millions, except share, per share and ratio data
Slide 41: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations 41 $s in millions, except share, per share and ratio data
Slide 42: Non-GAAP reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC 42 $s in millions, except share, per share and ratio data
Slide 43: Non-GAAP reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC 43 $s in millions, except share, per share and ratio data
Slide 44: Non-GAAP reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC 44 $s in millions, except share, per share and ratio data
Slide 45: Non-GAAP reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC 45 $s in millions, except share, per share and ratio data
Slide 46: Non-GAAP reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC 46 $s in millions, except share, per share and ratio data
Slide 47: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q4 2018 Earnings Presentation on 6ix