Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2015 Earnings Presentation
35 slides from Citizens Financial's earnings presentation, Oct 23, 2015
Slide 1: 3Q15 Financial Results
3Q15 Financial Results October 23, 2015
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: 3Q15 highlights
3Q15 highlights Improving Diluted EPS of $0.40 compares with Adjusted diluted EPS1 of $0.40 in 2Q15 and $0.36 in 3Q14 profitability and Solid operating leverage of 3% YoY, YoY 1% sequential quarter returns NIM improvement to 2.76% in 3Q15 from 2.72% in 2Q15 Generated 8% YoY average loan grow
Slide 4: Financial summary – GAAP
Financial summary – GAAP 3Q15 change from Highlights $s in millions 3Q15 2Q15 3Q14 2Q15 3Q14 Linked quarter: $ % $ % Net interest income $ 856 $ 840 $ 820 $ 16 2 % $ 36 4 % GAAP net income up $30 million driven by a $25 Noninterest income 353 360 341 (7) (2) 12 4 million after‐tax decrease in rest
Slide 5: 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”). 1 Restructuring charges and special items 3Q15 cha
Slide 6: Adjusted financial summary – excluding restructuring charges and special items
Adjusted financial summary ‐ excluding restructuring charges and special items1 3Q15 change from Highlights $s in millions 3Q15 2Q15 3Q14 2Q15 3Q14 $ % $ % 3Q15 vs. adjusted 2Q15: Net interest income $ 856 $ 840 $ 820 $ 16 2 % $ 36 4 % Net income increased $5 million from Adjusted 2Q15 Noninterest
Slide 7: Net interest income
Net interest income $s in millions, except earning Net interest income Highlights assets $119B $121B $123B $123B Linked quarter: $117B NII up $16 million, or 2% ─ Reflects $1.2 billion increase in average loans and leases and an additional day in the quarter $820 $840 $836 $840 $856 NIM improved
Slide 8: Net interest margin
Net interest margin NIM walk 2Q15 to 3Q15 0.01% 0.01% (0.01%) 0.03% 2 76% 2.76% 2.72% 2Q15 NIM% Reduction in Investment Loan Deposit 3Q15 NIM% cash/securities portfolio yields yields costs NIM walk 3Q14 to 3Q15 0.04% (0 01%) (0.01%) (0.06%) 0.05% (0.03%) 2.77% 2.76% 3Q14 NIM% Reduction in Investment
Slide 9: Noninterest income
Noninterest income $s in millions 3Q15 change h ffrom Highlights 3Q15 2Q15 3Q14 2Q15 3Q14 Linked quarter: $ % $ % Noninterest income down $7 million as Service charges and fees $ 145 $ 139 $ 144 $ 6 4 % $ 1 1 % growth in other income and service Card fees 60 60 58 — — 2 3 charges and fees was more
Slide 10: Adjusted noninterest expense – excluding restructuring charges and special items
Adjusted noninterest expense – excluding. restructuring charges and special items1 3Q15 change from Highlights $ iin millions $s illi 3Q15 2Q15 3Q14 2Q15 3Q14 3Q15 vs. Adjusted 2Q15: $ % $ % Adjusted salaries and benefits 1 $ 404 $ 405 $ 409 $ (1) — % $ (5) (1) % Noninterest expense down slightly
Slide 11: Consolidated average balance sheet
Consolidated average balance sheet 3Q15 change from Highlights $s in billions 3Q15 2Q15 3Q14 2Q15 3Q14 Linked q quarter: $ % $ % Total earning assets stable with prior quarter Investments and interest bearing deposits $ 25.8 $ 27.1 $ 27.3 $ (1.4) (5) % $ (1.6) (6) % ─ Commercial loans up $478 mill
Slide 12: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $50.7B $51.6B Linked quarter: $49.2B $50.1B $47.7B $2.4 Average loans increased $863 million, or 2% $2.5 $2.3 $2.6 $3.0 $2.7 $3.1 $3.0 $3.1 Consumer loan yields up 1 basis point reflecting $2 7 $2.7 $3.2
Slide 13: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $41.3B $41.8B Linked quarter: $40.1B $38.9B Average loans up $524 million, or 1%, with solid $37.8B $2.8 $3.1 $2.6 $2.4 growth in CRE and Franchise Finance $2.2 $7.4 $ $7.7 $ $8.2 Loan L yields i ld re
Slide 14: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest‐bearing interest bearing liabilities and DDA Highlights $111.2B $113.3B $113.0B Linked quarter: $106.7B $108.8B $3.9 $3.9 $4.1 Average interest‐bearing deposits increased $2.0 $2.8 $6.5 $5.1 $6.7 $6.1 $7.0 $4.4 $2.9 $2.1 billion, or
Slide 15: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 3Q15 Initiative Commentary Status 3Q15 household growth of 2% and deposits up 7% from 3Q14. New customer cross‐sell rate Reenergize household growth increased to 3.26 vs. 3.05 in 3Q14. LOs up 81, or 22%, and origination volume up 53% from 3Q14. Expand mor
Slide 16: Strong credit quality trends continue
Strong credit quality trends continue $s in millions Net charge‐offs (recoveries) Highlights Overall credit quality remains strong. NPLs declined by $16 million or $88 $80 2% QoQ and 4% YoY $54 $78 $75 $9 $6 $7 $3 $4 Net charge‐offs were $75 million, or 0.31% of average loans and leases $75 $72
Slide 17: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period‐end) 3Q14 4Q14 1Q15 2Q15 3Q15 1,2 Capital levels remain above regional peers Basel I/III transitional basis Basel I Basel III Common equity tier 1 capital $ 13.3 $ 13.2 $ 13.4 $ 13.3 $ 13.2 3Q15 Basel III common equity t
Slide 18: 4Q15 outlook
4Q15 outlook 4Q15 expectations vs vs. 3Q15 Net interest Average loan growth rate of ~1.5% income, net Net interest margin broadly stable interest margin Operating leverage, Positive operating p g leverage g expected p to continue;; anticipate p fee income ggrowth efficiency ratio Modest expe
Slide 19: Key messages
Key messages Continue to execute well on our broad agenda ─ Good clean quarter with positive operating leverage, rebound in NIM ─ Delivering for all stakeholders ─ Adding top talent to executive team New initiatives tracking to expectations Asset sensitivity continues to be stable Asset qual
Slide 20: Appendix
Appendix %£ Citizens Financial Group, Inc.” 19
Slide 21: Quarter over quarter results
Quarter over quarter results Adjusted pre‐provision profit1 Period‐end loans2 Adjusted return on average $s in millions $s in billions ibl assets1 tangible 10% $97.4 7% 2 bps $411 $90.7 0.66% 0.68% $372 3Q14 3Q15 3Q14 3Q15 3Q14 3Q15 Adjusted net income1 Period‐end deposits Adjusted return on a
Slide 22: Linked quarter results
Linked quarter results Adjusted pre‐provision profit1 Basel III common equity Adjusted return on average $s in millions tier i 1 capital i 2 i l ratio ibl assets1 tangible 3% unchanged 1 bps $399 $411 11.8% 11.8% 0.67% 0.68% 2Q15 3Q15 2Q15 3Q15 2Q15 3Q15 Adjusted net income1 Tier 1 leverage rati
Slide 23: Consumer Banking segment
Consumer Banking segment 3Q15 change from Highlights $s in millions 3Q15 2Q15 3Q14 2Q15 3Q14 Linked q quarter: $ % $ % Net income up $2 million, or 3% Net interest income $ 556 $ 544 $ 532 $ 12 2 % $ 24 5 % Noninterest income 235 230 226 5 2 9 4 Net interest income up $12 million, driven by loan
Slide 24: Commercial Banking segment
Commercial Banking segment 3Q15 change from Highlights $s in millions 3Q15 2Q15 3Q14 2Q15 3Q14 Linked q quarter: $ % $ % Commercial Banking net income increased $10 million Net interest income $ 299 $ 286 $ 270 $ 13 5 % $ 29 11 % Noninterest income 100 108 104 (8) (7) (4) (4) Total revenue up $5
Slide 25: Other
Other 3Q15 change from Highlights $s in millions 3Q15 2Q15 3Q14 2Q15 3Q14 Linked q quarter: $ % $ % Other recorded net income up $18 million, as lower total Net interest income $ 1 $ 10 $ 18 $ (9) (90) % $ (17) (94) % revenue was more than offset by a $40 million decrease in Noninterest income 18
Slide 26: 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”). as of and for the three months ended 1 Restructuri
Slide 27: Loan Reconciliation
Loan Reconciliation Average balances $s in millions 3Q15 change from 3Q14 4Q14 1Q15 2Q15 3Q15 2Q15 3Q14 Consumer Banking Segment $ 47,848 $ 49,351 $ 50,260 $ 51,024 $ 51,886 $ 862 2 % $ 4,038 8 % Add: Non‐core loans 2,932 2,801 2,667 2,517 2,358 (159) (6) (574) (20) (1) Retail loans in Commercial Ba
Slide 28: Non-core home equity portfolio serviced by others (SBO)
Non‐core home equity portfolio serviced by others (SBO)1 Non‐core period‐end loans $3.2B $3.0B $2.9B $2.7B $2.5B SBO balances by LTV SBO balances by FICO2 120+ < 70 < 620 3 760+ 11% 15% 100‐119 27% 30% 3Q14 4Q14 1Q15 2Q15 3Q15 15% 70‐79 620‐679 Retail Commercial SBO 17% SBO balances and charge‐offs
Slide 29: 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 30: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) FOR THE NINE MONTHS ENDED $s in millions, except per share data QUARTERLY TRENDS SEPTEMBER 30 3Q15 2Q15 1Q15 4Q14 3Q14 2015 2014 Noninterest income, excluding special items: Noninterest N i t t income i (GAAP) A $353 $
Slide 31: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE NINE MONTHS ENDED QUARTERLY TRENDS SEPTEMBER 30 3Q15 2Q15 1Q15 4Q14 3Q14 2015 2014 Efficiency ratio and efficiency ratio, excluding restructuring charges and special items:
Slide 32: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) FOR THE NINE MONTHS ENDED $s in millions, except per share data QUARTERLY TRENDS SEPTEMBER 30 3Q15 2Q15 1Q15 4Q14 3Q14 2015 2014 Outside services, excluding restructuring charges and special items: Outside services (GA
Slide 33: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments T H R E E M O N T H S E N D E D S E P T 3 0, T H R E E M O N T H S E N D E D J UN E 30 , T H R E E M O N T H S E N D E D M A R 3 1, $s in millions 2 015 2 015 20 15 C o ns um e r C o m m erc ia l C o ns um e r C o m m e rcia l C o nsum
Slide 34: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2015 2014 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income (loss) (GAAP) A $195 $427 ($3) $619 $130 $421 $11
Slide 35: Citizens Financial Group, Inc.
3« Citizens Financial Group, Inc.”
Citizens Financial Group — Q3 2015 Earnings Presentation on 6ix