Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2014 Earnings Presentation
33 slides from Citizens Financial's earnings presentation, Oct 27, 2014
Slide 1: 3Q14 Financial Results
3Q14 Financial Results October 27, 2014
Slide 2: Forward-looking statements
Forward-looking statements 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-looking statements. Also, any statement that does not describe historical
Slide 3: 3Q14 highlights
3Q14 highlights GAAP EPS of $0.34; Adjusted EPS1 of $0.36 up 38% from 3Q13 Improving Adjusted ROTCE1 of 6.2% vs. 4.3% in 3Q13 profitability and YoY average loan growth of 6% drives 6% growth in NII returns Benefit of growth and efficiency initiatives driving underlying sequential quarter PPNR improv
Slide 4: 3Q14 financial summary – GAAP
3Q14 financial summary – GAAP Highlights 3Q14 change from $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 $ % $ % Linked Quarter: 167 Net interest income $ 820 $ 833 $ 770 $ (13) (2) % $ 50 6% Net income down 40% from 2Q14 which 168 Noninterest income 341 640 383 (299) (47) % (42) (11) % included $108 milli
Slide 5: Restructuring charges and special items
Restructuring charges and special items 3Q14 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”). As of and for the three months ended Restructuring
Slide 6: Adjusted 3Q14 financial summary - excluding restructuring charges and special items
Adjusted 3Q14 financial summary - excluding restructuring charges and special items1 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 Linked quarter: $ % $ % Adjusted net income down $3 million 184 Net interest income $ 820 $ 833 $ 770 $ (13) (2) % $ 50 6% 1 largely driven by effe
Slide 7: Net interest income
Net interest income Net interest income Highlights $s in millions $116B $117B $113B Linked quarter: $106B $109B NII down $13 million driven by the effect of Chicago Divestiture and higher 2Q14 loan recoveries $833 ─ Estimated $13 million decrease related to Chicago $8202 $820 Divestiture and $7 mill
Slide 8: Adjusted noninterest income – excluding special items
Adjusted noninterest income – excluding special items1 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 Linked quarter: $ % $ % Adjusted noninterest income down $11 million from 215 Service charges and fees $ 144 $ 147 $ 163 $ (3) (2) % $ (19) (12) % higher 2Q14 which included: 21
Slide 9: Adjusted noninterest expense – excluding restructuring charges and special items
Adjusted noninterest expense – excluding restructuring charges and special items1 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 $ % $ % Adjusted noninterest expense down 235 Adjusted salary and benefits 1 $ 409 $ 424 $ 403 $ (15) (4) % $ 6 1% $44 million driven by an estimated
Slide 10: Consolidated 3Q14 average balance sheet
Consolidated 3Q14 average balance sheet 3Q14 change from $s in billions 3Q14 2Q14 3Q13 2Q14 3Q13 Highlights $ % $ % Total earning assets up 1% linked Investments and interest bearing quarter and 11% YoY despite $1.0 265 deposits $ 27.3 $ 26.8 $ 21.0 $ 0.5 2% $ 6.4 30 % 266 Total commercial loans bil
Slide 11: Total average loans and leases and LHFS
Total average loans and leases and LHFS Consumer Banking Average loans1 Highlights $47.4B $47.8B $44.8B $44.8B $46.2B Linked Quarter: 3.69% 3.68% 3.70% 3.69% 3.67% Consumer Banking segment loans increased $480 million despite $595 million decrease from Chicago Divestiture and 2Q14 sale of a $394 mil
Slide 12: Average deposits and rates
Average deposits and rates Average deposits and Highlights deposits held for sale Total average deposits, including deposits held for sale, $93.1B $93.2B $91.6B $92.2B $91.7B decreased by $490 million as a $4.5 billion decrease related to the Chicago Divestiture was largely offset by organic growth
Slide 13: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions 3Q13 4Q13 1Q14 2Q14 3Q14 1 Capital levels remain well above regional Basel I peers Tier 1 common capital $ 13.5 $ 13.3 $ 13.5 $ 13.4 $ 13.3 Basel I risk-weighted assets $ 96.7 $ 98.6 $ 100.4 $ 101.4 $ 103.2 ─ As part of plan to adju
Slide 14: Credit quality continues to improve
Credit quality continues to improve $s in millions $131 Net charge-offs (recoveries) Highlights $115 $26 Overall credit quality remains strong $19 $87 $88 Net charge-offs were $88 million, or 0.38% of average loans $100 $15 $68 $78 $9 and leases $11 $80 $75 Allowance coverage for NPLs improved to 11
Slide 15: Execution of key initiatives progressing well
Execution of key initiatives progressing well Consumer initiatives showing good traction ─ Mortgage, Business Banking and Wealth hiring meeting expectations ─ Auto loan volume very strong - $1.9 billion organic originations; ~$500 million in flow purchases ─ Education finance launched leading and ve
Slide 16: Making progress against key financial targets
Making progress against key financial targets End 2016 Key Indicators 3Q13 3Q14 targets Adjusted return on average tangible common 4.3% 6.2% 10%+ equity1 Adjusted return on average total tangible 0.5% 0.7% 1.0%+ assets1 Adjusted efficiency ratio1 68% 68% ~60% Tier 1 common equity ratio 13.9% 12.9%2
Slide 17: 4Q14 outlook
4Q14 outlook Net interest Anticipate 4Q14 loan growth of 2-3% vs. linked quarter income, net Project stable net interest margin interest margin Operating leverage, Expect modest operating leverage and slight improvement in operating efficiency ratio efficiency ratio Credit trends Asset quality trend
Slide 18: Key messages
Key messages Successful completion of the largest commercial bank IPO in U.S. history Underlying business performance continues to strengthen 2014 is a transition year, with Chicago region gain funding various initiatives to drive better performance over 2015/2016 Tracking well on all strategic and
Slide 19: Appendix
Appendix 3* Citizens Financial Group, Inc.” 18
Slide 20: Prior year quarter results
Prior year quarter results Adjusted pre-provision profit1 Basel I tier 1 common equity Adjusted return on average $s in millions capital ratio2 tangible assets1 $365 $372 2% 13.9% 100 bps 14 bps 12.9% 0.66% 0.52% 3Q13 3Q14 3Q13 3Q14 3Q13 3Q14 Adjusted net income1 Leverage ratio2 Adjusted return on a
Slide 21: Linked quarter results
Linked quarter results Adjusted pre-provision profit1 Basel I tier 1 common equity Adjusted return on average $s in millions capital ratio2 tangible assets1 $372 6% 13.3% 40 bps 2 bps $352 12.9% 0.68% 0.66% 2Q14 3Q14 2Q14 3Q14 2Q14 3Q14 Adjusted net income1 Leverage ratio2 Adjusted return on average
Slide 22: Net interest margin
Net interest margin NIM% walk 2Q14 to 3Q14 0.01% (0.01%) (0.01%) (0.01%) (0.02%) (0.02%) (0.04%) 2.87% 2.77% 2Q14 NIM% Swap Cost Deposit Yields Excess Cash at Volumes/Mix Sub Debt Asset Yields Chicago 3Q14 NIM% Fed Issuance Divestiture/ loan fee recoveries NIM% walk 3Q13 to 3Q14 0.09% 0.02% (0.01%)
Slide 23: Consumer Banking segment
Consumer Banking segment 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 Consumer Banking net income up $10 $ % $ % million with pre-provision profit up $22 310 Net interest income $ 532 $ 546 $ 543 $ (14) (3) % $ (11) (2) % million 311 Noninterest income 226 236 246 (10) (4) % (
Slide 24: Commercial Banking segment
Commercial Banking segment 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 $ % $ % Commercial Banking net income 323 Net interest income $ 270 $ 264 $ 263 $ 6 2% $ 7 3% decreased modestly from 2Q14 which 324 Noninterest income 104 107 93 (3) (3) % 11 12 % included the benefit of
Slide 25: Other
Other 3Q14 change from Highlights $s in millions 3Q14 2Q14 3Q13 2Q14 3Q13 Other net income down $132 $ % $ % million from 2Q14 336 Net interest income (expense) $ 18 $ 23 $ (36) $ (5) (22) % $ 54 150 % 337 Noninterest income 11 297 44 (286) (96) % (33) (75) % ─ Noninterest income decreased $286 mill
Slide 26: Restructuring charges and special items
Restructuring charges and special items 3Q14 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”). This table shows impacts on expense categories. As
Slide 27: Non-core home equity portfolio serviced by others (SBO)
Non-core home equity portfolio serviced by others (SBO)1 Non-core period-end loans $4.1B $3.8B $3.6B $3.4B $3.2B SBO balances by LTV SBO balances by FICO 120+ < 69 < 619 6% 760+ 14% 19% 100-119 18% 31% 3Q13 4Q13 1Q14 2Q14 3Q14 Retail Commercial SBO 70-79 17% 620-679 16% 20% SBO balances and charge-o
Slide 28: 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 goodwill impairment, restructuring charges and/or special items, which are usually included, where applicable, in the f
Slide 29: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table QUARTERLY TRENDS (Excluding restructuring charges and special items) 3Q14 2Q14 1Q14 4Q13 3Q13 $s in millions, except per share data Noninterest income, excluding special items: Noninterest income (GAAP) A $341 $640 $358 $379 $383 Less: Special items - Chicago gain — 288
Slide 30: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table QUARTERLY TRENDS (Excluding restructuring charges and special items) 3Q14 2Q14 1Q14 4Q13 3Q13 $s in millions, except per share data Efficiency ratio and efficiency ratio, excluding restructuring charges and special items: Net interest income (GAAP) $820 $833 $808 $779 $
Slide 31: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data QUARTERLY TRENDS 3Q14 2Q14 1Q14 4Q13 3Q13 Other operating expense, excluding restructuring charges and special items: Other operating expense (GAAP) AA $122 $171 $146 $143 $123 Les
Slide 32: Non-GAAP Reconciliation Table
Non-GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions Three Months Ended September 30, 2014 Three Months Ended June 30, 2014 Three Months Ended March 31, 2014 Consumer Commercia l Consumer Commercia l Consumer Commercia l Other Consol ida ted Other Cons olida ted Other Cons
Slide 33: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q3 2014 Earnings Presentation on 6ix