Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q2 2018 Earnings Presentation
29 slides from Citizens Financial's earnings presentation, Jul 20, 2018
Slide 1: 2Q18 Financial Results
2Q18 Financial Results July 20, 2018
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. Statements regarding potential future share repurchases and future dividends are forward-lookin
Slide 3: 2Q18 highlights
2Q18 highlights Net income available to common of $425 million up 34% YoY and 12% QoQ; Diluted EPS of $0.88 up 40% YoY and 13% QoQ ROTCE of 12.9% compares with 9.6% in 2Q17 and 11.7% in 1Q18(1) Improving Revenue of $1.5 billion up 8% YoY, 7% on an Underlying basis; up 3% QoQ(1) profitability ─ NII u
Slide 4: GAAP financial summary
GAAP financial summary 2Q18 change from Highlights $s in millions 2Q18 1Q18 2Q17 1Q18 2Q17 Linked quarter: YoY $ % $ % Underlying(1) Net interest income $1,121 $1,091 $1,026 $ 30 3% $ 95 9% Net income available to common stockholders up $44 million, or 12%, and EPS up $0.10, or 13%, driven by strong
Slide 5: 2Q18 Underlying financial summary
2Q18 Underlying financial summary(1) Highlights 2Q18 change from Linked quarter: 2Q18 1Q18 2Q17 1Q18 2Q17 $s in millions Reported Reported Underlying (1) Reported Underlying (1) Net income available to common stockholders up $44 million, or 12%, and EPS up $0.10, or 13% Net interest income $ 1,121 $
Slide 6: Net interest income
Net interest income $s in millions, except earning assets Net interest income Highlights Linked quarter: $137.6B $137.5B $138.4B $138.7B $140.5B NII up $30 million, or 3% ─ Reflects 2% average loan growth, a 2 bp increase in NIM and the benefit of day count NIM of 3.18% up from 3.16% $1,080 $1,091 $
Slide 7: Noninterest income
Noninterest income $s in millions Highlights 2Q18 change from 2Q18 1Q18 2Q17 1Q18 2Q17 Linked quarter: Noninterest income up $17 million, or 5% $ % $ % ─ Capital markets fees up $9 million, or 23%, driven by Service charges and fees $ 127 $ 124 $ 129 $ 3 2 % $ (2) (2) % strength in syndications; pip
Slide 8: Noninterest expense
Noninterest expense $s in millions Highlights 2Q18 change from Linked quarter: 2Q18 1Q18 2Q17 1Q18 2Q17 Noninterest expense down $8 million, or 1% $ % $ % Salaries and benefits $ 453 $ 470 $ 432 $ (17) (4) % $ 21 5% Salaries and employee benefits decreased $17 million tied to seasonally lower payrol
Slide 9: Average Loans and Leases
Average Loans and Leases YoY Loan Average core loans and leases Growth Highlights Total Core Linked quarter: $109.2B $111.0B $106.8B $107.3B $108.4B 4% Average core loans and leases up $1.8 billion, or 2% ─ Core retail, relatively stable with growth in Residential Mortgage, Education and Unsecured m
Slide 10: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $130.7B Linked quarter: $127.5B $127.5B $128.6B $129.1B Total average deposits up $1.7 billion, or 2% Total long-term borrowings $11.7 $13.5 $13.4 Largely reflects growth in term deposits, checki
Slide 11: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Highlights Provision for credit losses, net charge-offs Overall credit quality remains strong, reflecting growth in lower-risk retail portfolios and a stable risk profile in commercial $83 $85 $78 $78 $70 $75 $72 $76 NPLs to total loans and leases
Slide 12: Capital and liquidity remain strong
Capital and liquidity remain strong Highlights as of Capital levels remain at the higher end of the range for $s in billions (period-end) 2Q17 3Q17 4Q17 1Q18 2Q18 regional peers (1) Basel III basis Common equity tier 1 capital $ 14.1 $ 14.1 $ 14.3 $ 14.4 $ 14.6 2Q18 CET1 ratio of 11.2% is stable com
Slide 13: TOP programs demonstrate our continuous improvement mindset
TOP programs demonstrate our continuous improvement mindset TOP IV actions largely complete; expected 2018 pre-tax benefit of ~$100-$110 million TOP V Program Targeting pre-tax benefit of ~$90-$100 million by end of 2019 Selected examples Efficiency initiatives Target ~67% of total Branch transforma
Slide 14: Strategic initiatives update
Strategic initiatives update NIM up 21 bps YoY; ~7 bps of this is from our BSO efforts Strategic & business highlights Balance Sheet Optimization Grow more attractive Core Education, personal unsecured and merchant risk-adjusted financing up 21% YoY Consumer return portfolios CRE originations up 85%
Slide 15: Making consistent progress against our financial goals
Making consistent progress against our financial goals Medium-term Key Indicators targets 11.7% 12.9% ~13 - 15% 10.1% 10.4% Adjusted/ 7.3% 8.0% 8.4% 9.0% 9.6% Underlying 6.3% 6.2% 6.8% 6.7% 6.7% 6.6% 6.8% 6.6% 4.3% 5.2% 5.2% ROTCE(1) Adjusted/ Underlying 68% 69% 70% 68% 68% 67% 68% 67% 66% 66% 66% 6
Slide 16: 3Q18 CFG standalone outlook
3Q18 CFG standalone outlook CFG standalone(2) 2Q18 3Q18 expectations vs. 2Q18 Net interest $113.5 billion average loans ~1.25% average loan growth income, net 3.18% NIM Modest increase in NIM interest margin Noninterest $388 million Up modestly income Up modestly Noninterest $875 million Positive op
Slide 17: FAMC standalone outlook- expect early August close
FAMC standalone outlook- expect early August close FAMC standalone 3Q18 expectations Net interest Modest benefit to NII income, net ~$550 million period-end loans held for sale interest margin ~$650 million period-end deposits Noninterest ~$25-$30 million mortgage banking fees income ~$600 million M
Slide 18: Key messages
Key messages 2Q18 results highlight disciplined execution and continued momentum ─ Delivered EPS growth of 40% YoY, with Underlying revenue growth of 7%(1) ─ 12.9% ROTCE and 58% efficiency ratio(1) ─ Operating leverage of 7.0% YoY, 4.3% on an Underlying basis(1) ─ Continue to execute well on TOP pro
Slide 19: Appendix
Appendix 3* Citizens Financial Group, Inc.” 18
Slide 20: Notable items: 2Q17 Impairments on aircraft lease assets
Notable items: 2Q17 Impairments on aircraft lease assets Lease 2Q18 change from Notable items*(1) 2Q17 impairment 2Q17 Reported Underlying*(1) ($s in millions, except per share data) 2Q18 Reported impact Underlying*(1) 2Q17 2Q17 Net interest income $ 1,121 $ 1,026 $ - $ 1,026 9 % 9 % Noninterest inc
Slide 21: Year-over-year results
Year-over-year results Average loans(1) Average deposits Pre-provision profit $s in billions $s in billions $s in millions $113.5 3% $115.1 4% $109.8 $110.8 $634 19% $558 $532 14% 2Q17 2Q18 2Q17 2Q18 2Q17 2Q18 Net income available to Return on average total Return on average tangible common sharehol
Slide 22: Linked-quarter results
Linked-quarter results Average loans(1) Average deposits Pre-provision profit $s in billions $s in billions $s in millions $111.8 $113.5 2% $113.4 $115.1 2% $634 9% $579 1Q18 2Q18 1Q18 2Q18 1Q18 2Q18 Net income available to Return on average total Return on average tangible common shareholders and E
Slide 23: 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 22
Slide 24: 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 23
Slide 25: 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 24
Slide 26: 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 25
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 26
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 27
Slide 29: Citizens Financial Group, Inc.
3* Citizens Financial Group, Inc.”
Citizens Financial Group — Q2 2018 Earnings Presentation on 6ix