Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — FY2015 Earnings Presentation
52 slides from Citizens Financial's earnings presentation, Jan 22, 2016
Slide 1: 4Q15 and FY 2015 Financial Results
4Q15 and FY 2015 Financial Results January 22, 2016 Exhibit 99.2
Slide 2: Forward-looking statements
Forward-looking statements 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 “believes,” “expects,” “
Slide 3: Table of contents
Table of contents page 4Q15 highlights 3 Adjusted financial summary 6 Adjusted FY2015 performance vs. guidance 18 FY2016 outlook 25 1Q16 outlook 26 Appendix 1 – 2015 28 Appendix 2 – 2016 outlook 37 Appendix 3 – Non-GAAP reconciliation 42
Slide 4: 4Q15 highlights
4Q15 highlights Adjusted results are non-GAAP items. Where there is a reference to an “Adjusted” result in a paragraph, all measures which follow that “Adjusted” result are also “Adjusted” and exclude restructuring charges and special items as applicable. See important information on use of Non-GAAP
Slide 5: Financial summary – GAAP
Financial summary – GAAP Non-GAAP item. See important information on use of Non-GAAP items in the Appendix. Includes held for sale. Loan-to-deposit ratio is period-end. Return on average tangible common equity. Return on average total tangible assets. Full-time equivalent employees. Highlights Linke
Slide 6: Restructuring charges and special items
Restructuring charges and special items GAAP results included restructuring charges and special items related to enhancing efficiencies and improving processes across the organization and separation from The Royal Bank of Scotland Group plc (“RBS”). These are non-GAAP financial measures. Please see
Slide 7: Adjusted financial summary - excluding restructuring charges and special items
Adjusted financial summary - excluding restructuring charges and special items(1) Non-GAAP item. Adjusted results exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, efficiency and effectiveness programs and separation from RBS. See important inform
Slide 8: Adjusted full year financial summary - excluding restructuring charges and special items
Adjusted full year financial summary - excluding restructuring charges and special items(1) Non-GAAP item. Adjusted results exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, efficiency and effectiveness programs and separation from RBS. See import
Slide 9: Net interest income
Net interest income Highlights Net interest income $s in millions, except earning assets Average interest-earning assets Average interest earning assets Net interest income Net interest margin Includes Interest-bearing cash and due from banks and deposits in banks. Linked quarter: NII up $14 million
Slide 10: Net interest margin
Net interest margin NIM walk 4Q14 to 4Q15 NIM walk 3Q15 to 4Q15
Slide 11: Noninterest income
Noninterest income Linked quarter: Noninterest income up $9 million led by higher service charges and fees Service charges and fees up 8% reflecting strength in Commercial and Consumer, as Treasury Solutions initiatives gain traction Capital markets fees much lower than expected given challenges in
Slide 12: Adjusted noninterest expense – excluding restructuring charges and special items
4Q15 change from $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 $ % $ % Adjusted salaries and benefits (1) 404 $ 404 $ 396 $ — $ — % 8 $ 2 % Adjusted occupancy (1) 74 75 76 (1) (1) (2) (3) Adjusted equipment expense (1) 67 62 62 5 8 5 8 Adjusted outside services (1) 102 89 88 13 15 14 16 Adjusted amortizat
Slide 13: Average balance sheet
4Q15 change from $s in billions 4Q15 3Q15 4Q14 3Q15 4Q14 $ % $ % Investments and interest bearing deposits 25.7 $ 25.8 $ 26.5 $ (0.1) $ — % (0.8) $ (3) % Total commercial loans 45.8 45.2 42.3 0.6 1 3.6 8 Total retail loans 52.4 51.6 49.8 0.8 1 2.6 5 Total loans and leases 98.2 96.8 92.0 1.4 1 6.2 7
Slide 14: Consumer Banking average loans and leases
Consumer Banking average loans and leases Other includes Credit Card, RV, Marine, Other. Average loans and leases $s in billions Linked quarter: Average loans increased $896 million, or 2%, largely reflecting strength in mortgage, student and Apple iPhone loans partially offset by the impact of lowe
Slide 15: Commercial Banking average loans and leases
Commercial Banking average loans and leases Linked quarter: Average loans up $721 million, or 2%, with solid growth in CRE, Mid-Corporate and Franchise Finance Loan yields remained relatively stable despite the continued effect of the low-rate environment Prior year quarter: Average loans up $3.6 bi
Slide 16: Average funding and cost of funds
Average funding and cost of funds Linked quarter: Total average deposits up $378 million DDA up $721 million, interest checking up $183 million, and term deposits down $529 million reflecting focus on pricing discipline Total deposit costs of 0.24% decreased 1 bp, reflecting enhanced commercial and
Slide 17: Strong credit quality trends continue
Overall credit quality remains strong. NPLs declined by $41 million or 4% YoY Net charge-offs of $77 million, or 0.31% of average loans and leases remained stable with 3Q15 and down from 0.35% in 4Q14 Provision for credit losses of $91 million in 4Q15 Allowance for loan and lease losses of 1.23% of
Slide 18: Capital and liquidity remain strong
Capital and liquidity remain strong Highlights Current reporting period regulatory capital ratios are preliminary. Periods prior to 1Q15 reported on a Basel I basis. Basel III ratios assume that certain definitions impacting qualifying Basel III capital will phase in through 2018. Ratios also reflec
Slide 19: Adjusted FY2015 guidance vs. Adjusted FY2014
Adjusted FY2015 guidance vs. Adjusted FY2014 FY2015 performance vs. guidance Net interest income, net interest margin Net interest margin broadly stable, though with risks Operating leverage, efficiency ratio Credit trends and cost Adjusted expense growth relatively modest Target mid-single digit op
Slide 20: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives Initiative FY15 Status Commentary Reenergize household growth New customer households grew ~30,000 retail checking households in FY15 or by 1.3% vs. 4Q14 and cross-sell rate increased to 3.23 vs. 3.06. Deposits were up 7% versus prior year quarter. Expand
Slide 21: Aspire to be a top-performing regional bank
Aspire to be a top-performing regional bank, delivering well for all stakeholders Colleagues Regulators Investors Communities & Society Customer-centric culture Customers
Slide 22: Achieve current targets, then raise the bar
Achieve current targets, then raise the bar Strive for consistency in performance, limit tail risk Target relatively high pay-out ratio, steady and growing dividend Investors Customers Colleagues Community Regulators Continue to improve customer satisfaction Top 10 in JD Power for Consumer segment T
Slide 23: Medium-term targets and key indicators
Non-GAAP item. Adjusted results exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, efficiency and effectiveness programs and separation from RBS. See important information on use of Non-GAAP items in the Appendix. 2013 excludes $4.4 billion pre-tax
Slide 24: Keys to successful 2016
Keys to successful 2016 Expect positive market environment with steady GDP growth, solid loan demand, and gradual rate hikes Drive strong loan growth across consumer and commercial Deliver underlying NIM stability/gradual rise in 2016, consistent with 2H15 performance Further NIM expansion expected
Slide 25: Keys to successful 2016 (continued)
Keys to successful 2016 (continued) Customers Further embed customer-centric mindset within the organization Leverage customer insights to continue progress on key loyalty metrics and business measures Consumer: Drive household growth and cross-sell by leveraging targeting strategies towards improve
Slide 26: FY2016 outlook
FY2016 outlook *Before the estimated effect of a prospective card reward accounting change, see Appendix 2 page 41 for additional detail. Adjusted FY 2015 results exclude $50 million pre-tax restructuring charges and special items. Net interest income, net interest margin Net interest income growth
Slide 27: 1Q16 outlook
1Q16 outlook Net interest income, net interest margin Noninterest expense Credit trends, tax rate 1.5-2.0% loan growth Expect ~5 basis point improvement in net interest margin given recent rate rise Day count impact of ~$6 million decrease to NII Up modestly given seasonal compensation impacts* Prov
Slide 28: 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 2015 was a
Slide 29: Appendix – 2015
Appendix 1 -— 2015 Xx Citizens
Slide 30: Quarter over quarter results
Quarter over quarter results Adjusted pre-provision profit $s in millions Adjusted return on average tangible assets Adjusted net income $s in millions Adjusted results are non-GAAP items and exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, effic
Slide 31: Linked quarter results
Linked quarter results á 15 bps â 1 bps á 3% Adjusted Diluted EPS á 5% (1) Adjusted pre-provision profit $s in millions Adjusted return on average tangible assets Period-end loans $s in billions (1) (1) (2) Adjusted net income $s in millions Adjusted return on average tangible common equity Period-e
Slide 32: Full year results
Full year results Adjusted pre-provision profit $s in millions Adjusted return on average tangible assets Adjusted results are non-GAAP items and exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, efficiency and effectiveness programs and separatio
Slide 33: Consumer Banking segment
Consumer Banking segment Non-GAAP item. Adjusted results exclude the effect of net restructuring charges and special items associated with Chicago Divestiture, efficiency and effectiveness programs and separation from RBS. See important information on use of Non-GAAP items in the Appendix. Includes
Slide 34: Commercial Banking segment
Commercial Banking segment Non-GAAP item. See important information on use of Non-GAAP items in the Appendix. Includes held for sale. Operating segments are allocated capital on a risk-adjusted basis considering economic and regulatory capital requirements. We approximate that regulatory capital is
Slide 35: Other
Other Linked quarter: Other recorded net income was $2 million for 4Q15, down $5 million as higher revenue and lower taxes were more than offset by increased provision tied to reserve build and higher expenses Net interest income increased $3 million Noninterest income increased $11 million, reflect
Slide 36: Loan Reconciliation
Loan Reconciliation Average balances $s in millions Primarily Treasury Solutions (Credit Cards). Primarily Business Banking. 4Q15 change from 4Q14 1Q15 2Q15 3Q15 4Q15 3Q15 4Q14 Consumer Banking Segment 49,351 $ 50,260 $ 51,024 $ 51,886 $ 52,737 $ 851 $ 2 % 3,386 $ 7 % Add: Non-core loans 2,801 2,667
Slide 37: Non-core home equity portfolio serviced by others (SBO)
Non-core home equity portfolio serviced by others (SBO)(1) SBO balances by FICO(2) SBO balances by LTV SBO balances and charge-offs Top 5 SBO balances by state(1) Non-core period-end loans SBO balances by product SBO Lien Position 1st Lien 2nd Lien < 70 70-79 80-89 90-99 100-119 120+ < 620 620-679 6
Slide 38: Appendix — 2016 Outlook
Appendix 2 — 2016 Outlook Xx Citizens
Slide 39: FY2016 outlook compared with 2015
FY2016 outlook compared with 2015 Net interest income, net interest margin Operating leverage, efficiency ratio Credit trends, tax rate Capital, liquidity and funding Adjusted 2015 vs. Adjusted 2014 excluding Chicago Divestiture impact FY2016 expectations vs. Adjusted 2015(2) Balance sheet growth 5-
Slide 40: Strong growth in net interest income
Strong growth in net interest income Net interest income outlook 2015-2016(2) 7-10% growth (3) (4) (5) Includes ~(1) bp related to the Chicago Divestiture. Assumes benefit of December 31, 2015 implied forward yield curve. Other includes funding costs broadly offset by the benefit of swaps. December
Slide 41: Noninterest expense remains well-controlled
Noninterest expense remains well-controlled Adjusted noninterest expense(1) trend 2014-2015 Noninterest expense outlook 2015-2016 2.5-3.5% growth* 0.4% decrease * Before the estimated effect of a prospective card reward accounting change, see Appendix 2 page 41 for additional detail. Non-GAAP item.
Slide 42: 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 both Card fees and Other operating expense by an est
Slide 43: Appendix – Non-GAAP reconciliation
Appendix 3 – Non-GAAP reconciliation
Slide 44: Non-GAAP Financial Measures
Non-GAAP Financial Measures This document contains non-GAAP financial measures. The table below presents reconciliations of certain non-GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are usually included, where applicable, in the financial results pres
Slide 45: Non-GAAP Reconciliation Table (Excluding restructuring charges and special items)
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Noninterest income, excluding special items: Noninterest income (GAAP) A $362 $353 $360 $347 $339 $1,422 $1,678 Less: Special items - Chicago gai
Slide 46: Non-GAAP Reconciliation Table (Excluding restructuring charges and special items)
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Efficiency ratio and efficiency ratio, excluding restructuring charges and special items: Net interest income (GAAP) $870 $856 $840 $836 $840 $3,
Slide 47: Non-GAAP Reconciliation Table (Excluding restructuring charges and special items)
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Outside services, excluding restructuring charges and special items: Outside services (GAAP) X $104 $89 $99 $79 $106 $371 $420 Less: Restructurin
Slide 48: Non-GAAP Reconciliation Table (Excluding Chicago Divestiture)
Non-GAAP Reconciliation Table (Excluding Chicago Divestiture) $s in millions, 2015 2014 2013 2011 $ % Adjusted net interest income, excluding Chicago adjustment: Net interest income (GAAP) RR $3,402 $3,301 ($101) (3)% Less: Estimated Chicago Divestiture impact — 26 26 100% Adjusted net interest inco
Slide 49: Non-GAAP Reconciliation Table (Excluding Chicago Divestiture)
Non-GAAP Reconciliation Table (Excluding Chicago Divestiture) $s in millions, 2015 2014 Adjusted net interest margin, excluding Chicago adjustment: Average interest earning assets (GAAP) BBB $122,950 $116,187 Less: Estimated - Chicago adjustment - 516 Earning assets CCC $122,950 $115,671 Earning ass
Slide 50: Non-GAAP Reconciliation - Segments
Non-GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions Consumer Banking Commercial Banking Other Consolidated Consumer Banking Commercial Banking Other Consolidated Consumer Banking Commercial Banking Other Consolidated Net income available to common stockholders: Net income
Slide 51: Non-GAAP Reconciliation - Segments
Non-GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions Consumer Banking Commercial Banking Other Consolidated Consumer Banking Commercial Banking Other Consolidated Net income available to common stockholders: Net income (loss) (GAAP) A $262 $579 ($1) $840 $182 $561 $122 $86
Slide 52: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — FY2015 Earnings Presentation on 6ix