Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q1 2017 Earnings Presentation
34 slides from Citizens Financial's earnings presentation, Apr 20, 2017
Slide 1: 1Q17 Financial Results
1Q17 Financial Results April 20, 2017 Exhibit 99.2
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 Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement
Slide 3: 1Q17 highlights
Provision expense of $96 million decreased $6 million from 4Q16 as lower net charge-offs were partially offset by an increase in the reserve for unfunded commitments Overall credit quality continues to improve; NPLs remain stable QoQ at 97 bps of loans NPL coverage ratio of 117% vs. 118% in 4Q16 and
Slide 4: GAAP financial summary
GAAP financial summary Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and their reconciliation to GAAP financial measures. “Underlying” results
Slide 5: Net interest income
Net interest income Highlights Includes interest-bearing cash and due from banks and deposits in banks. Linked quarter: NII up $19 million, or 2% Reflects 1.5% average loan growth driven by commercial, education, mortgage and other unsecured retail loans, partially offset by the impact of lower day
Slide 6: Net interest margin
Net interest margin NIM walk 1Q16 to 1Q17 NIM walk 4Q16 to 1Q17 2.90% 2.96% 0.08% (0.01)% (0.03)% 0.02% 4Q16 NIM% Loan yields Borrowing costs/other Deposit costs Investment portfolio yield/growth 1Q17 NIM%
Slide 7: Noninterest income
Note: Other income includes bank-owned life insurance and other income. Noninterest income Linked quarter: Noninterest income improved $2 million Service charges and fees decreased $7 million, reflecting seasonality and fewer days Card fees increased $10 million as revised contract terms commencing
Slide 8: Noninterest expense highlights
Highlights $s in millions Linked quarter: Noninterest expense increased $7 million, or 1% Salaries and employee benefits expense increased $24 million given the impact of seasonally higher payroll taxes and 401(k) benefit costs FTEs decreased 124, as efficiency reductions offset strategic hiring Occ
Slide 9: Consolidated average balance sheet
Consolidated average balance sheet Linked quarter: Total earning assets up $1.7 billion, or 1%, with loan growth of $1.5 billion, or 1.5%. Period-end loans up $442 million Commercial loans up $1.0 billion, or 2%, on continued strength in Commercial Real Estate, Mid-corporate and Middle Market, Franc
Slide 10: Consumer Banking average loans and leases
Consumer Banking average loans and leases Other includes Credit Card, RV, Marine, Other. $s in billions Linked quarter: Average loans increased $655 million, or 1%, largely reflecting growth in education, residential mortgages and other unsecured categories, partially offset by lower home equity and
Slide 11: Commercial Banking average loans and leases
Commercial Banking average loans and leases Linked quarter: Average loans up $1.1 billion, or 2%, with continued strength in Commercial Real Estate, Mid-corporate and Middle Market, Franchise Finance and Industry Verticals Loan yields improved 23 bps, largely tied to an increase in 30-day LIBOR Prio
Slide 12: Average funding and cost of funds
Average funding and cost of funds Linked quarter: Total average deposits up $829 million, or 1% Largely reflecting growth in term deposits, checking with interest and savings partially offset by seasonally lower commercial deposits Total deposit costs of 0.32% increased 4 bps, reflecting the impact
Slide 13: Overall credit quality continues to improve
Overall credit quality continues to improve, reflecting growth in higher quality, lower risk retail loans and stable risk appetite in commercial NPLs to total loans and leases of 0.97% was stable with 4Q16 and improved 10 bps from 1.07% in 1Q16 NPLs decreased $29 million from 1Q16, reflecting a $72
Slide 14: Capital levels remain at the higher end of the range for regional peers
Capital levels remain at the higher end of the range for regional peers 1Q17 Basel III common equity tier 1 capital ratio (transitional basis) remained stable Net income: ~26 bps increase RWA growth: ~10 bps decrease Common share repurchase: ~10 bps decrease Dividends: ~6 bps decrease LDR of 97% dec
Slide 15: Strategic initiatives 1Q17 status commentary
Initiative 1Q17 Status Commentary Grow and deepen relationships with primary households Primary households up ~23,000 YoY and added ~15,000 primary HHs with a loan or investment. Continue to build out Mass Affluent and Affluent value propositions. Citizens Checkup continues to help build stronger re
Slide 16: TOP III Program
TOP III Program Revenue initiatives Target ~$25-$30 million Commercial Attrition: Predictive tool and early intervention efforts are being executed to reduce Middle Market and Treasury Solutions attrition Unsecured Lending: Initiative launched with good response rates; early read on performance is p
Slide 17: Goal is to deliver a 10%+ run-rate ROTCE in the medium term
Goal is to deliver a 10%+ run-rate ROTCE in the medium term 1.0%+ Adjusted efficiency ratio(1) ~60% 10%+ Making consistent progress against our financial goals Medium-term targets Key Indicators Adjusted ROTCE(1) Adjusted return on average total tangible assets(1) EPS Adjusted diluted EPS(1) Common
Slide 18: 2Q17 outlook
2Q17 outlook Net interest income, net interest margin Noninterest expense Credit trends, tax rate Period-end loans up ~1.5%; ~1% average loan growth Expect ~3-4 basis point improvement in net interest margin given benefit of recent rate rise Relatively stable Positive operating leverage and further
Slide 19: Key messages
Key messages Citizens 1Q17 results highlight continued momentum Strong revenue, net income and EPS growth Robust operating leverage, expanding net interest margin, improving efficiency ratio and active capital management ROTCE of 9.7%; 9.0% excluding the impact of certain state tax matters Strong ba
Slide 20: Appendix
Appendix Xx Citizens
Slide 21: Linked-quarter results
Linked-quarter results á 0.4% á 2% á 3% EPS á11% á12 bps á125 bps Excludes loans held for sale. Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures a
Slide 22: Quarter-over-quarter results
$297 $0.57 9.0% Underlying EPS á 39% Underlying á 237 bps Quarter-over-quarter results á 25% á 7% á 9% á23 bps á307 bps EPS á 49% á 43% $0.61 Pre-provision profit $s in millions Return on average total tangible assets $s in billions Net income and EPS $s in millions, except per share data Return on
Slide 23: We remain positioned for rising rates
We remain positioned for rising rates… Net interest income poised to benefit from rising rates Continue to target asset sensitivity at ~ 6% as it is relatively early in the Federal Reserve’s rate and balance sheet normalization course Most sensitive to the short end of the curve given that ~85% of c
Slide 24: Consumer Banking segment
Consumer Banking segment Please see important information on Key Performance Metrics and Non-GAAP Financial Measures at the end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and their reconciliation to GAAP financial measures. Includes held for s
Slide 25: Commercial Banking segment
Commercial Banking segment Linked quarter: Commercial Banking net income increased $8 million, or 5% Total revenue increased $11 million, or 2%, driven by loan growth and higher loan yields Average loans up $1.1 billion; deposits decreased $437 million Loan growth driven by growth in Commercial Real
Slide 26: Other
Other Linked quarter: Other recorded net income of $45 million, up $27 million First quarter results included a $23 million benefit, or $0.04 per diluted common share, related to settlement of certain state tax matters that lowered the effective tax rate by 5.2 per cent Other reflects net interest i
Slide 27: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 1Q17 4Q16 3Q16 2Q16 1Q16 $ % $ % Noninterest income, adjusted: Noninterest income (GAAP) $379 $377 $435 $355 $330 $2 1 % $49 15 % Less: Notable items — — 67 — — — — — — Non
Slide 28: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data
Slide 29: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 1) Basel III ratios assume certain definitions impacting qualifying Basel III capital, which otherwise will phase in through 2019, are fully phased-in. Ratios also reflect
Slide 30: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data 1Q17 4Q16 3Q16 2Q16 1Q16 $ % $ % Other income, adjusted Other income (GAAP) $24 $25 $87 $15 $20 ($1) (4%) $4 20 % Less: Notable items — — 67 — — — — — — Other income, adjus
Slide 31: Key performance metrics, Non-GAAP financial measures and reconciliations – segment
Key performance metrics, Non-GAAP financial measures and reconciliations – segment $s in millions, except share, per share and ratio data Consumer Banking Commercial Banking Other Consolidated Consumer Banking Commercial Banking Other Consolidated Consumer Banking Commercial Banking Other Consolidat
Slide 32: Key performance metrics, Non-GAAP financial measures and reconciliations – underlying
Key performance metrics, Non-GAAP financial measures and reconciliations – underlying $s in millions, except share, per share and ratio data 1Q17 4Q16 1Q16 $/bps % $/bps % Income before income tax expense (GAAP) A $434 $414 $332 $20 5 % $102 31 % Income tax expense and effective income tax rate, und
Slide 33: Key performance metrics, Non-GAAP financial measures and reconciliations
Key performance metrics, Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, 2017 2016 2016 2016 2016 2015 2015 20
Slide 34: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q1 2017 Earnings Presentation on 6ix