Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (May 2018)
48 slides from Citizens Financial's debt investor presentation, May 2018
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation May 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: Overview
Overview Company overview and strategy Improving financial performance Capital/funding and liquidity Risk management 3
Slide 4: Company overview and strategy
Company overview and strategy
Slide 5: Key investment highlights
Key investment highlights 13th largest retail bank holding company in the U.S. with a strong Attractive, competitive position in a well-diversified geographic footprint client-centric franchise with Attractive business mix with improving profitability scale Client-centric model focused on deep
Slide 6: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets $153.5 billion in total assets(1) Robust deposit market share of 12% in top 10 MSAs(2) – #2 deposit market share in New England(2) Diverse economies/affluent demographics CFG corporate headquarters Providence, RI CFG branch location
Slide 7: Substantial progress in prudently growing the balance sheet
Substantial progress in prudently growing the balance sheet Top 5 deposit market share in 9 of 10 largest MSAs(4) Dimension(1) Rank(2) $90.9 billion $108.7 billion Assets: $153.5 billion #13 2012(11) 1Q18(11) Loans: $111.4 billion(3) #12 20% 28% #11 nationally; Deposits: $115.7 billion Top 5 rank in
Slide 8: Improving financial performance
Improving financial performance 8
Slide 9: Making consistent progress against our financial goals
Making consistent progress against our financial goals Strong execution against all strategic initiatives and continued momentum ROTCE(1) Medium-term Efficiency ratio(1) Medium-term (Return on average tangible common equity) target target 12.3% ~13-15% 68.5% 68.7% ~52-56% 67.6% 68.1% 63.9% 7.7% 66.5
Slide 10: Delivered attractive balance sheet and revenue growth
Delivered attractive balance sheet and revenue growth FY17 vs. FY16 A strong platform well-positioned to drive value Strong loan growth Growing revenues faster Strong NIM expansion (Average total loan growth) (Total revenue growth) (Net interest margin change) vs Peers 9.9% vs Peers 20 bps vs Peers
Slide 11: Continued focus on expense control and improving returns
Continued focus on expense control and improving returns FY17 vs. FY16 Well-controlled expenses; Strong operating leverage Efficiency improvement (Efficiency ratio(1) change) investing for growth (YoY Positive operating leverage(1)) (Noninterest expense change) vs Peers vs Peers vs Peers 5.3% 6.8% C
Slide 12: Further opportunities to improve returns: BSO
Further opportunities to improve returns: BSO Since 3Q13, delivered ~740 basis points of improvement in ROTCE to 11.7%(1) Balance Sheet Optimization (“BSO”) Improve risk-adjusted returns and NIM while driving growth Enterprise-wide initiative with the same intensity and rigor as our TOP efficiency
Slide 13: Targeting higher return and deeper relationship lending
Targeting higher return and deeper relationship lending Consumer Grow Education and Unsecured Evaluation of loan portfolio lending; reduce Auto Utilize FinTech relationship and High Credit Card SBA to enhance Business Banking Personal Unsecured Further expand in-footprint Home Unsecured Salabl
Slide 14: Targeting lower cost relationship-oriented deposit base
Targeting lower cost relationship-oriented deposit base Consumer Data & analytics drive Evaluation of deposits personalized targeting across Consumer and products Low Commercial DDA Targeted mobile and digital Consumer acquisition CWI Opportunity to acquire lower-cost deposits by Personal Savi
Slide 15: Remain rate sensitive
Remain rate sensitive Interest rate sensitivity ranking (200 bps gradual increase) 9.0% Net interest income positioned to continue to benefit from rising rates 5.9% 5.4% 5.0% ─ Our asset sensitivity of 5.0% 4.0% 3.1% compares with 5.1% at 4Q17 2.1% 2.1% 1.7% and 6.0% at 1Q17 1.2% CMA RF PNC CFG KE
Slide 16: Further opportunities to improve returns: Growth in fee income businesses
Further opportunities to improve returns: Growth in fee income businesses Fee Income Consumer Commercial Wealth Capital & Global Markets Investments in FCs and sales, technology Broaden capabilities in DCM, M&A, CRE platforms and products with shift toward managed money New FX options/currency
Slide 17: Further opportunities to improve returns: TOP
Further opportunities to improve returns: TOP Continuous improvement - TOP programs Self-fund investments through efficiency, expense discipline and mindset of continuous improvement Use new technologies to deliver more effective outcomes at lower costs TOP IV program on track to deliver run-rat
Slide 18: Strategic initiatives update
Strategic initiatives update NIM up 20 bps YoY with ~7 bps due to our overall Strategic & business highlights Balance Sheet Optimization BSO efforts Grow higher risk-adjusted Core Education, personal unsecured and merchant return portfolios financing up 35% YoY; renewed SOFI flow agreement CRE
Slide 19: Capital/funding and liquidity
Capital/funding and liquidity
Slide 20: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers Total capital comparison(1) Highlights FITB 10.6% 15.2% Continue to maintain strong CET1 capital position relative to our peers MTB 11.0% 14.8% ─ Expect annual normalization of ~30-40 bps given both capital return and strong loan growth CFG
Slide 21: Average Loans and Leases
Average Loans and Leases Average core loans and leases YoY Loan Highlights Growth Total Core Linked quarter: $107.3B $108.4B $109.2B 4% Average core loans and leases up $686 million, or 1%; $105.5B $106.8B up 1% on a period-end basis ─ Core retail loans up $431 million, or 1%, largely reflecting
Slide 22: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $127.5B $127.5B $128.6B $129.1B Linked quarter: $126.2B Total average deposits remained relatively stable despite $13.6 $12.2 $11.7 $13.5 Total long-term borrowings $12.4 seasonality $2.4 $3.1
Slide 23: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 93% U.S. Agency MBS $26.1 $25.9 2.62% 2.45% $0.9 $0.9 $0.8 $0.8 3% AAA-rated non-agency Total HTM $4.1 $3.7 $0.4 $0.3 18% of total earning assets, in line with peers $8.6 $8.5 Primary goal is to prov
Slide 24: Strong deposit base, with opportunities to grow stable deposits cost-effectively
Strong deposit base, with opportunities to grow stable deposits cost-effectively Consumer Data & analytics drive holistic and personalized customer $113.4 billion 1Q18 average deposits targeting models across all programs and products 82% Core(1) Executing targeted mobile and online digital cust
Slide 25: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities (1) 18.2% 15.5% 15.0% 12.7% 12.1% 11.8% 11.7% 8.6% 8.3% 8.2% 7.4% PNC FITB BBT KEY USB Peer Avg CFG STI MTB RF CMA FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordi
Slide 26: Risk management
Risk management 3% Citizens Financial Group, Inc”
Slide 27: 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 $96 $87 $83 NPLs to total loans and leases ratio of 0.78%
Slide 28: Diversified and granular loan mix
Diversified and granular loan mix $58.6 billion $52.0 billion 4Q17 retail portfolio 4Q17 commercial portfolio(3) Business Non-Core Banking Non-Core Credit Cards Out of Other Residential 23% Leases 2% Out of 5%3%2% footprint(1,2) 5% 5% 34% footprint(1,2) Education Mortgage Finance 29% 15% Midwest 13%
Slide 29: At Citizens, we continue to smartly grow our balance sheet
At Citizens, we continue to smartly grow our balance sheet Total loans(1) $ billions $103 $109 $96 23% $89 Good loan growth with rising yields 3.87% 3.37% 3.32% 3.51% 2014 2015 2016 2017 Loan yields Loan portfolio returns 25% 14% 22% 21% 22% (2) Return on loan book regulatory capital improvi
Slide 30: Appendix — Risk management
Appendix — Risk management %£ Citizens Financial Group, Inc”
Slide 31: Core retail portfolio
Core retail portfolio Highlights 4Q17 $57.4 billion core retail portfolio(1) Weighted-average core FICO score of 763 by Product type by Geography by refreshed FICO 65% of the retail portfolio has a FICO score Other Cards Mortgage Out of of >750 New 800+ <600 Education 5%3% Footprint England 36%
Slide 32: Re-balancing retail loan mix to drive improved risk-adjusted returns
Re-balancing retail loan mix to drive improved risk-adjusted returns Retail loan performance Average balances; $ in billions 2013 2017 Loan Loss Loan Loss Mix(1) rate Mix(1) rate $57.0 $54.2 Core resi mortgage 18% 0.38% 28% 0.04% $51.3 $46.7 $48.1 98% Core home equity 44 0.66 27 0.13 97% Auto 19 0.0
Slide 33: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 4Q17 $16.9 billion core mortgage portfolio Jumbo mortgages originated primarily within the by Refreshed CLTV (1) by Refreshed FICO (1) Bank’s lending footprint Predominately in-footprint with a weighted- 90-100% > 800 average refreshed FICO score of 78
Slide 34: Core home equity portfolio
Core home equity portfolio(1) Highlights 4Q17 $13.5 billion HELOC 4Q17 $1.4 billion HELOAN 53% of the portfolio is secured by 1st lien by Lien position (2) by Lien position (2) Weighted-average FICO of 767 93% has an LTV of less than 80% 2nd 1st 35% 4Q17 HELOC originations of $1.6 billion 52
Slide 35: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of December 31, 2017 Between 2018 – 2021, $3.2 billion in drawn balances 2015 – $1.26 billion 2016 – $916 million 2017 – $1.09 billion ($3.7 billion of undrawn balances) are scheduled to 2% 3% 3% 2% 2% 3% 1% 3% 3% mature, or 23%, of th
Slide 36: Auto portfolio credit metrics
Auto portfolio credit metrics Highlights(1) 4Q17 $13.2 billion Auto portfolio Auto Finance portfolio – purchase only, no (2) by Refreshed FICO score (1,2) by Origination LTV leasing, weighted-average FICO score of 728 < 620 % new car ≥ 120% ≤ 80% − 4Q17 originations of $1.4 billion with > 800 62%
Slide 37: Core education finance portfolio overview
Core education finance portfolio overview Highlights 4Q17 $7.9 billion core education finance portfolio Core education finance portfolio weighted-average FICO score (1) by Refreshed FICO by Segment (1) of 777 and co-sign rate of 46% 95% of InSchool loans co-signed with weighted-average FICO > 80
Slide 38: Education refinance portfolio overview
Education refinance portfolio overview Highlights 4Q17 $5.4 billion education refinance portfolio Education refinance product largely mitigates two greatest student by Portfolio lending risks: Citizens − Did the borrower graduate? ERL − Did the borrower gain employment? 64% Education refinance p
Slide 39: Consumer unsecured
Consumer unsecured* Highlights 4Q17 $2.2 billion consumer unsecured portfolio Launched merchant partnership financing in 3Q15 $s in millions $2,241 Developing strategic partnerships designed around high-quality merchant partnership offerings $1,691 $1,456 46% − Partnerships utilize loss-sharing
Slide 40: Core commercial portfolio overview
Core commercial portfolio overview Highlights 4Q17 $51.2 billion core commercial portfolio Asset quality relatively stable and credit performance by Industry Sector(1) has returned to pre-crisis levels Arts, Entertainment, and Recreation All Others (3) Overall credit risk is moderate and compare
Slide 41: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 4Q17 $10.5 billion Commercial Real Estate Line of Business(1) Continued progress in uptiering portfolio to by Facility Type by Property Type larger, more well-capitalized institutional Other CRE collateral Hospitality and upper middle mar
Slide 42: Appendix — Key performance metrics, Non-GAAP financial measures and reconciliations
Appendix — Key performance metrics, Non-GAAP financial measures and reconciliations
Slide 43: 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 QUARTERLY TRENDS 1Q18 Change 1Q18 4Q17 3Q17 2Q17 1Q17 4Q17 1Q17 $ % $ % Noninterest inc ome, Underly ing: Noninterest income (GAAP) $371 $404 $381 $370 $379 ($33) (8%) ($8)
Slide 44: 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 QUARTERLY TRENDS 1Q18 Change 1Q18 4Q17 3Q17 2Q17 1Q17 4Q17 1Q17 $/bps % $/bps % Operating leverage: Total revenue (GAAP) A $1,462 $1,484 $1,443 $1,396 $1,384 ($22) (1.57%)
Slide 45: 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 QUARTERLY TRENDS 1Q18 Change 1Q18 4Q17 3Q17 2Q17 1Q17 4Q17 1Q17 $/bps % $/bps % Tangible book value per c ommon share: Common shares - at period-end (GAAP) Q 487,551,444 49
Slide 46: 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 FULL Y EAR Quarterly Trend 2017 Change 2017 2016 2015 2014 2016 3Q13 $/bps % Noninterest inc ome, Adjusted/Underly ing: Noninterest income (GAAP) $1,534 $1,497 $1,422 $1,67
Slide 47: 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 FULL Y EAR Quarterly Trend 2017 Change 2017 2016 2015 2014 2016 3Q13 $/bps % Return on average tangible c ommon equity and return on average tangible c ommon equity , Adjus
Slide 48: 3< Citizens
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