Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q4 2021 Earnings Presentation
42 slides from Citizens Financial's earnings presentation, Jan 19, 2022
Slide 1: 4Q21 and 2021 Financial Results
4Q21 and 2021 Financial Results January 19, 2022
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. Statements regarding potential future share repurchases and future dividends as well as the potential effect
Slide 3: 4Q21 and Full Year 2021 GAAP financial summary
4Q21 and Full Year 2021 GAAP financial summary Full Year Q/Q Y/Y 2021 vs. 2020 $s in millions 4Q21 3Q21 4Q20 $/bps % $/bps % 2021 2020 $/bps % Net interest income $ 1,126 $ 1,145 $ 1,129 $ (19) (2) % $ (3) — % $ 4,512 $ 4,586 $ (74) (2) % Noninterest income 594 514 578 80 16 16 3 2,135 2,319 (184) (
Slide 4: 4Q21 and Full Year 2021 Underlying financial summary
4Q21 and Full Year 2021 Underlying financial summary(1) Full Year Q/Q Y/Y 2021 vs. 2020 $s in millions 4Q21 3Q21 4Q20 $/bps % $/bps % 2021 2020 $/bps % Net interest income $ 1,126 $ 1,145 $ 1,129 $ (19) (2)% $ (3) —% $ 4,512 $ 4,586 $ (74) (2)% Noninterest income 594 514 578 80 16 16 3 2,135 2,319 (
Slide 5: Overview
Overview(1) ■ Underlying net income of $2.4 billion, with EPS of $5.34 Strong full- ■ Record Capital Markets up 71%, or 60% excluding acquisitions, record Wealth up 18% year 2021 ■ Underlying ROTCE of 16.0% compares with 7.5% for 2020 results ■ Excellent credit results; NCOs of 26 bps; NPLs to loans
Slide 6: Net interest income
Net interest income Loan growth helping offset reduced PPP benefit NII and NIM Linked Quarter $s in millions, except earning assets ■ NII down 2% given modestly lower net interest margin, $163.5B $164.4B $166.3B $167.3B $168.0B partially offset by loan growth ■ NIM of 2.66%, down 6 bps reflecting lo
Slide 7: Noninterest income
Noninterest income Outstanding Capital Markets results, up ~80% YoY excluding acquisitions(1) $ Linked Quarter $s in millions 4Q21 3Q21 4Q20 Q/Q Y/Y ■ Noninterest income increased 16%; 10% ex acquisitions Capital Markets fees $ 184 $ 72 $ 88 $ 112 $ 96 – 4Q21 includes $29 million of fees from acquis
Slide 8: Noninterest expense
Noninterest expense(1) Continued expense discipline and focus on efficiency initiatives to fund strategic investments Underlying, as applicable $ Linked Quarter $s in millions 4Q21 3Q21 4Q20 Q/Q Y/Y Salaries & employee benefits $ 546 $ 522 $ 519 $ 24 $ 27 ■ Underlying noninterest expense was broadly
Slide 9: Loans and leases
Loans and leases Period-end loans up 4% QoQ; 5% ex PPP, with commercial accelerating, up 6% ex PPP(1) Average loans and leases(2) Linked Quarter $s in billions ■ Average loans up $2.6 billion, or 2%; up 3% excluding $123.5 $122.8 $123.5 $122.6 $125.2 PPP impact – Retail up $2.3 billion, or 4%, refle
Slide 10: Average funding and cost of funds
Average funding and cost of funds Significantly enhanced deposit franchise will improve beta performance in next rate cycle Growing lower-cost deposits(1) Improved deposit mix(2) $s in billions $s in billions $145.3 $146.6 $150.3 $151.9 $153.0 $147.2 $154.4 $125.3 $102.5 0.27% 0.20% 0.94% 0.16% 0.14
Slide 11: Credit quality
Credit quality(1) Provision for credit losses, net charge-offs Highlights $s in millions ■ NCOs of $45 million, or 14 bps of average loans and leases, 0.61% stable with 3Q21 0.52% ■ Nonaccrual loans decreased 6 bps to 0.55% of total loans QoQ 0.25% driven by commercial 0.14% 0.14% ■ Credit provision
Slide 12: Capital remains strong
Capital remains strong $s in billions (period-end) 4Q20 1Q21 2Q21 3Q21 4Q21 Highlights (1)(2) Basel III basis ■ 4Q21 CET1 ratio of 9.9%, compares with 10.3% in 3Q21 Common equity tier 1 capital $ 14.6 $ 14.9 $ 15.3 $ 15.6 $ 15.7 ■ Paid $168 million in common dividends to shareholders Risk-weighted a
Slide 13: Dramatically repositioned Consumer Banking, poised for sustained growth
Dramatically repositioned Consumer Banking, poised for sustained growth Our Vision: To be our customers' trusted and primary financial partner supporting them along life's journey Key strategic principles Digital-first model National expansion Deepening relationships driving momentum 2015 Today Buil
Slide 14: Consumer strategic growth and profitability initiatives
Consumer strategic growth and profitability initiatives Significant incremental revenue opportunity over the next five years Strategic priorities 2022 expected progress Year five targets ■ Broad marketing introductory campaign ■ Deposit and loan CAGR 2-3x existing markets ■ Branch productivity impro
Slide 15: Commercial Banking - broadening capabilities and strengthening execution
Commercial Banking - broadening capabilities and strengthening execution Strategic Priorities Transformed the business Delivering results Strong league table results(1) ■ Significant investments in talent and capabilities since IPO Middle-market bookrunner ■ Strengthened corporate finance and M&A ad
Slide 16: Business highlights
Business highlights Shifting to offense, positioned for growth, delivering for stakeholders • Achieved TOP 6 pre-tax run-rate benefit of ~$425 million • Announced HSBC branch and Investors acquisitions giving us a Top 10 deposit position in the EuroMoney Awards for Enterprise New York City Metro mar
Slide 17: TOP programs drive improving financial performance
TOP programs drive improving financial performance Transforming how we operate and deliver for customers and colleagues TOP program benefits Launched new TOP 7 program $s in millions Enterprise and business initiatives ~$425 ■ Mature agile delivery model and strengthen end-to- end customer journeys
Slide 18: Citizens Corporate Responsibility - 2021 summary
Citizens Corporate Responsibility - 2021 summary Environmental Social Governance • Adopted targets to reduce our • Continued progress on our $10MM social equity • Aligned annual corporate Scope 1 and 2 GHG emissions 30% commitment and our $500MM commitment to responsibility reporting to GRI and by 2
Slide 19: FY2022 Outlook - Standalone
FY2022 Outlook - Standalone 2021 Underlying(1) 2022 Underlying outlook - CFG standalone* Net interest ■ $4,512 million ■ Up 3-5%; up high single digits ex PPP income ■ $123.6B average loans ■ Mid single digit average loan growth; up high single digits ex PPP Balance ■ $166.5B average interest-earnin
Slide 20: 1Q22 outlook vs. 4Q21 - Standalone
1Q22 outlook vs. 4Q21 - Standalone 4Q21 Underlying(1) 1Q22 Underlying outlook - CFG standalone* ■ Down ~1% reflecting ~$18 million impact from lower day count and ~$20 Net interest ■ $1,126 million million less PPP benefit, partially offset by the benefit of loan growth; income stable including impa
Slide 21: Citizens positioned for superior growth
Citizens positioned for superior growth Entering 2022 with strong momentum Transformed bank since IPO – Repositioned Consumer and Commercial Banking businesses, with focus on attractive customer segments 1 and sustainable growth – Significantly modernized and strengthened technology capabilities; di
Slide 22: Appendix
Appendix
Slide 23: Acquisition timeline
Acquisition timeline HSBC* integration The HSBC integration is on target for closure February 18, 2022; completed two dress rehearsals with the final dress rehearsal in mid-January 3Q 2021 4Q 2021 1Q 2022 2Q 2022 - 1Q 2023 Jul Aug Sep Oct Nov Dec Jan Feb Mar 2Q22 3Q22 4Q22 1Q23 Conversion Developmen
Slide 24: FY2022 Underlying expense outlook
FY2022 Underlying expense outlook(1) Noninterest expense 2020-2021 $s in millions ~$118 ~$22 ~$(180) ~$55 ~$95 • Mortgage • Operations • Branch actions • Engineering/Cyber/ • Contact centers • E2E digitization Digital • Marketing $3,976 $3,866 • Organization • Wealth simplification • National expans
Slide 25: Allocation of allowance for credit losses by product type
Allocation of allowance for credit losses by product type September 30, 2021 December 31, 2021 Loans and Allowance Coverage Coverage Loans and Allowance Coverage Coverage $s in millions Leases (ex-PPP)(3) Leases (ex-PPP)(3) Allowance for Loans and Lease Losses Commercial and industrial(1) $41,854 $5
Slide 26: Reiterating medium-term financial targets
Reiterating medium-term financial targets(1) Medium-term financial targets Key economic assumptions ■ Real GDP growth of ~4% for 2022; ROTCE ~14-16% trending toward ~3% annually over the medium term ~9.75-10.00% ■ Unemployment rate of ~3.5% by YE2022; CET1 stable from there over the medium term Divi
Slide 27: Underlying FY2021 performance vs. guidance
Underlying FY2021 performance vs. guidance(1) Results reflect good fee, expense and credit performance in a tough environment for loan growth and rates Underlying FY2021 Guidance Underlying FY2021 Results excluding Acquisitions Net interest ■ Net interest income down slightly vs. FY20 ■ Net interest
Slide 28: Linked-quarter Underlying results
Linked-quarter Underlying results(1) Pre-provision profit Average loans Return on average total $s in millions $s in billions tangible assets $710 é6% é2% é4 bps $671 $122.6 $125.2 1.21% 1.25% 3Q21 4Q21 3Q21 4Q21 3Q21 4Q21 Net income available to Return on average tangible Average deposits common sh
Slide 29: Year-over-year Underlying results
Year-over-year Underlying results(1) Pre-provision profit Average loans Return on average total $s in millions $s in billions tangible assets ê4% é1% é15 bps $123.5 $125.2 1.25% $737 $710 1.10% 4Q20 4Q21 4Q20 4Q21 4Q20 4Q21 Net income available to Average deposits Return on average tangible common s
Slide 30: Full Year Underlying results
Full Year Underlying results(1) Pre-provision profit Average loans Return on average total $s in millions $s in billions tangible assets ê12% ê1% é67 bps 1.34% $124.5 $123.6 $3,039 $2,671 0.67% 2020 2021 2020 2021 2020 2021 Net income available to Average deposits Return on average tangible common s
Slide 31: Notable Items
Notable Items(1) Quarterly results for 2021 and 2020 reflect notable items primarily related to TOP transformational and revenue and efficiency initiatives as well as integration costs associated with pending and closed acquisitions, primarily HSBC East Coast branches and online deposits, Investors
Slide 32: Notes
Notes Notes on Non-GAAP Financial Measures See important information on 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 measures. "Unde
Slide 33: Notes continued
Notes continued Notes on slide 15 - Commercial Banking - broadening capabilities and strengthening execution 1) Thomson Reuters LPC, Loan syndication league table ranking for the prior twelve months as of 4Q21 and full year 2021 based on deals for Overall U.S. Middle Market (defined as Borrower Reve
Slide 34: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS FULL YEAR 4Q21 Change 2021 Change 4Q21 3Q21 4Q20 3Q21 4Q20 2021 2020 2020 $ % $ % $ % Total revenue, Underlying: Total revenue (GAAP) A $1,720 $1,659 $1,707 $61 4% $13 1% $6,647 $6
Slide 35: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS FULL YEAR 4Q21 Change 2021 Change 4Q21 3Q21 4Q20 3Q21 4Q20 2021 2020 2020 $/bps % $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,720 $1,659 $1,707 $61 3.58% $13 0.68
Slide 36: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS FULL YEAR 4Q21 Change 2021 Change 4Q21 3Q21 4Q20 3Q21 4Q20 2021 2020 2020 $/bps % $/bps % $/bps % Return on average total tangible assets and return on average total tangible asset
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 4Q21 Change 4Q21 3Q21 4Q20 3Q21 4Q20 $/bps % $/bps % Salaries and employee benefits, Underlying: Salaries and employee benefits (GAAP) $551 $509 $537 $42 8% $14 3% Less: Notable it
Slide 38: Non-GAAP financial measures and reconciliations
Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data QUARTERLY TRENDS 2Q21 1Q21 Total revenue, Underlying: Total revenue (GAAP) A $1,609 $1,659 Less: Notable items — — Total revenue, Underlying (non-GAAP) B $1,609 $1,659 Noninterest expense, Underlyi
Slide 39: Non-GAAP financial measures and reconciliations - excluding the impact of PPP loans
Non-GAAP financial measures and reconciliations - excluding the impact of PPP loans $s in millions QUARTERLY TRENDS 4Q21 Change 4Q21 3Q21 4Q20 3Q21 4Q20 $/bps % $/bps % Total loans, excluding the impact of PPP loans: Total loans (GAAP) $128,163 $123,318 $123,090 $4,845 4% $5,073 4% Less: PPP loans 7
Slide 40: Non-GAAP financial measures and reconciliations - Underlying excluding Acquisitions
Non-GAAP financial measures and reconciliations - Underlying excluding Acquisitions $s in millions, except ratio data QUARTERLY TRENDS FULL YEAR 4Q21 Change 2021 Change 4Q21 3Q21 4Q20 3Q21 4Q20 2021 2020 2020 $/bps % $/bps % $/bps % Noninterest income, Underlying excluding Acquisitions: Noninterest
Slide 41: Non-GAAP financial measures and reconciliations - Underlying excluding Acquisitions
Non-GAAP financial measures and reconciliations - Underlying excluding Acquisitions $s in millions, except ratio data QUARTERLY TRENDS FULL YEAR 4Q21 Change 2021 Change 4Q21 3Q21 4Q20 3Q21 4Q20 2021 2020 2020 $/bps % $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,720 $1,659 $1,707 $61
Slide 42: Citizens Financial Group, Inc.
3< Citizens Financial Group, Inc.”
Citizens Financial Group — Q4 2021 Earnings Presentation on 6ix