Citizens Financial Group, Inc. · NYSE:CFG

Citizens Financial — Debt Investor Presentation (September 2019)

49 slides from Citizens Financial's debt investor presentation, September 2019

  1. Slide 1: Fixed Income Investor Presentation

    Fixed Income Investor Presentation September 2019 Dave Lindenauer, Treasurer Ellen Taylor, Head of Investor Relations

  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 meaning of Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends are for

  3. Slide 3: Key Messages

    Key Messages  Value and power of franchise  Strong execution vs peers  Key performance drivers: ─ Investing in future-oriented digital, data and technology platforms ─ Driving efficiency through Tapping Our Potential and Balance Sheet Optimization ─ Enhancing product offerings and expanding geogr

  4. Slide 4: Business overview

    Business overview * Citizens Financial Group, Inc.”

  5. Slide 5: Strong franchise with leading positions in attractive markets

    Strong franchise with leading positions in attractive markets(1) Attractive footprint with large mass-affluent and affluent segments Franchise highlights  Footprint GDP above national average — Personal consumption 43% higher than the national average — Higher percentage of individuals with ≥ 4-yea

  6. Slide 6: Diversified and balanced business model

    Diversified and balanced business model(1) Consumer Loans and Leases Commercial $116.8 billion(3) In Footprint Coverage  Retail Deposit Services  Commercial & Industrial Banking  Mobile/Online Banking  Commercial Real Estate 53%  Mortgage(2)  Corporate Verticals 47%  Home Equity Loans/Lines ─

  7. Slide 7: Strong execution has led to outperformance vs peers

    Strong execution has led to outperformance vs peers(1) $s in billions % Better Peer rankings than peers(2) (out of 10)(2) Observations Net Interest $4.5 ~$4.7 $3.8 $4.2 $3.4 Income $3.3  Reflects growth and balance  6% #4 sheet optimization initiatives 2014 2015 2016 2017 2018 2019 C ~$1.8 Fee Inc

  8. Slide 8: Strong execution has led to outperformance vs peers

    Strong execution has led to outperformance vs peers(1) $s in billions, excluding EPS % Better Peer rankings than peers(2) (out of 10)(2) Observations ~$2.7 $2.3 $2.6 $1.6 $1.9  Driving strong revenue PPNR $1.5  43% #3 growth and positive operating leverage 2014 2015 2016 2017 2018 2019 C 68.7% 66.

  9. Slide 9: Key performance drivers into 2020 and beyond

    Key performance drivers into 2020 and beyond Continuous  Invest in future-oriented digital, data and technology platforms improvement  Continue to drive improved efficiency and effectiveness through Tapping Our mindset Potential (“TOP”) and Balance Sheet Optimization (“BSO”) initiatives Consumer 

  10. Slide 10: Committed to excellence in every dimension

    Committed to excellence in every dimension Strong Commitment to Best-in-class Solid risk culture customers talent management  Commitment to  #3 2019 American  Top-flight  Recapturing the value colleagues and a Banker/ management team of franchise with meaningful work Reputation and board prudent

  11. Slide 11: We have made consistent progress broadening capabilities

    We have made consistent progress broadening capabilities 1st regional bank Innovating for Created innovative merchant finance to market with attractive growth partnership platform with exceptional national digital Consumer Banking customer experience platform Have taken mortgage Created top-15 bank-

  12. Slide 12: Investing in future-oriented digital services and next generation technology

    Investing in future-oriented digital services and next generation technology Delivering a customer-focused, adaptable, secure & resilient technology environment Modernize strategic Cloud Protecting the core platforms  Embrace a data-driven API-based  Adoption of a hybrid  Prepare for emerging cyb

  13. Slide 13: Launching a significant TOP Program

    Launching a significant TOP 6 Program $s in millions Embarking on an ambitious journey to transform how we operate and deliver for customers and colleagues – expected to deliver ~$300-$325 million in pre-tax run rate benefit by YE2021 Targeted TOP program benefits(1) Operating leverage ~$300-325 ~$2

  14. Slide 14: BSO: Rigorous program to improve returns while driving growth

    BSO: Rigorous program to improve returns while driving growth Assets Liabilities Loan portfolio Deposits  Reposition/optimize loan mix  Optimize mix with focus on  Reallocate capital within categories; lower-cost categories ® optimize credit-only relationships  Citizens Access diversifies Invest

  15. Slide 15: Consumer Banking making the investments to position us for the future

    Consumer Banking making the investments to position us for the future Enhancing product and advisory capabilities; aiming to be ‘trusted advisor’  Improving customer experience through significant investments in new Continued technologies and seamless integration of digital and physical distributio

  16. Slide 16: Commercial Banking well-positioned for continued growth

    Commercial Banking well-positioned for continued growth Enhanced coverage model, expanded geographic reach & solution sets, strengthening fee income with integrated approach  Driving momentum with up-tiered talent and geographic expansion Continue to  Enhancing product and advisory capabilities se

  17. Slide 17: Building fee capabilities organically and through targeted acquisitions

    Building fee capabilities organically and through targeted acquisitions Significant opportunity to improve fee income Consumer Commercial  Investments in personnel plus sales, technology platforms and products with Capital & Global  Broaden capabilities in DCM, M&A, CRE shift towards managed money

  18. Slide 18: Balance sheet/capital/funding and liquidity

    Balance sheet/capital/funding and liquidity 18

  19. Slide 19: Strong, clean balance sheet funded largely by robust deposit franchise

    Strong, clean balance sheet funded largely by robust deposit franchise(1)  Well capitalized with a common equity tier 1 capital ratio of 10.5%  Strong asset-quality performance with net charge-offs of 36 bps(2) in 2Q19  Robust deposit franchise with $97.2 billion of average core deposits(3), with

  20. Slide 20: High-quality investment portfolio

    High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield 2.56% 2.57%  93% U.S. Agency MBS $26.0 $25.8 $0.7 $0.7  3% AAA-rated non-agency $0.8 $3.6 $3.4 Total HTM  17% of total earning assets, below peer bank $0.3 $0.9 2Q19 average of ~21% $8.6 $8.7  Primary go

  21. Slide 21: Stable high-quality deposit mix

    Stable high-quality deposit mix $s in billions Deposit mix (6/30/2019) $124 billion Consumer Banking Small business Commercial Banking Wealth Other $86.2 12% 3% $30.6 $30.8 $78.1 5% 16% Government CWI 25% 24% 18% Commercial 19% Term 16% 24% 28% Operational 21% 25% DDA 22% Non- Savings 51% 44% 43% 47

  22. Slide 22: Growth in deposit costs is consistent with overall deposit growth

    Growth in deposit costs is consistent with overall deposit growth Total deposit cost growth vs. total deposit growth(1) Highlights (2Q19 vs. 2Q18) 0.45%  Continue to outpace peers on deposit growth 0.40% R2=0.73 KEY USB CFG  Majority of the deposit base in retail 0.35% Deposit Cost Growth BBT PNC

  23. Slide 23: Moderating Asset Sensitivity

    Moderating Asset Sensitivity(1,2) Highlights Interest rate sensitivity trend  Taking prudent steps to reduce structural asset sensitivity over time 5.2% 4.9% 4.6% 4.2% ─ Opportunistically used hedges to 2.9% moderate IRR given recent yield 1.9% 2.1% 1.8% curve deterioration 1.0% 0.6% ─ Shifted sens

  24. Slide 24: Plans to adjust capital structure but remain above peers

    Plans to adjust capital structure but remain above peers Total capital comparison(1,2) Highlights  Continue our glide path to reduce CET1 ratio while 14.2% BBT 10.4% maintaining strong capital position relative to our peers ─ Project CET1 ratio of ~10.1% at Dec 31, 2019, ~50 bps FITB 9.6% 13.5% red

  25. Slide 25: Targeting a more peer-like funding structure

    Targeting a more peer-like funding structure 20.3% Total Borrowings/Total Liabilities (1) 16.6% 15.8% 14.1% 13.2% 12.9% 12.2% 12.2% 12.1% 11.7% 9.9% PNC BBT STI Peer Avg USB CMA FITB RF KEY MTB CFG Senior debt/other Subordinated notes and debentures Trading liabilities Commercial paper Fed funds pur

  26. Slide 26: Rating agency credit ratings

    Rating agency credit ratings S&P Fitch S&P Moody's Fitch Citizens Financial Group, Inc. Citizens Bank, N.A. Long-term Credit Rating BBB+ BBB+ Long-term Issuer Rating A- Baa1 BBB+ Short-Term Credit Rating A-2 F1 Short-Term Issuer Rating A-2 - F1 Subordinated debt BBB BBB Long-term Deposit Rating - A1

  27. Slide 27: Citizens is a frequent issuer of senior debt, sub debt, and preferred stock

    Citizens is a frequent issuer of senior debt, sub debt, and preferred stock $s in millions Diversified Funding Platforms and Balanced Maturity Profile Historical Citizens Fixed Income Issuance # of Issuances Per Year 3 3 3 3 3 $300 $350 $500 $3,250 $250 $600 $1,750 $1,500 $1,000 $750 2015 2016 2017

  28. Slide 28: Risk position and credit quality

    Risk position and credit quality 28

  29. Slide 29: Diversified and granular loan mix

    Diversified and granular loan mix $59.9 billion $56.4 billion 2Q19 retail portfolio 2Q19 core commercial portfolio by Industry Sector (1) Non-Core All Others (3) Other Arts, Entertainment, and Recreation Automotive 4% Real Estate and Rental Education InSchool 6% 2% Educational Services 2% and Leasin

  30. Slide 30: Highly disciplined on credit

    Highly disciplined on credit $s in billions 2019 Bank Holding Company-run loss rate of 4.1% on loan portfolio improved by 50 bps relative to 2018(1) Super prime/prime-focused, core retail portfolio; Granular/diverse core commercial portfolio; refreshed FICOs improved YoY(2) risk-ratings improved YoY

  31. Slide 31: Driving improved results

    Driving improved results $s in billions Improved commercial criticized Improved retail loan loss rates asset trend 2013 2Q19 Loan Loss Loan Loss (1) (1) Mix rate Mix rate $3.3 Core resi mortgage 18% 0.38% 32% 0.01% $2.7 Core home equity 44 0.66 22 0.06 Auto 19 0.06 20 0.49 Education Core education r

  32. Slide 32: Core mortgage portfolio overview

    Core mortgage portfolio overview Highlights 2Q19 $19.1 billion core mortgage portfolio  Jumbo mortgages originated primarily by Refreshed CLTV (1) by Refreshed FICO (1) within the Bank’s lending footprint < 600 90-100% 600-649 80-89%  Predominately in-footprint with a 2% 4% 650-699 8% weighted-ave

  33. Slide 33: Core home equity portfolio

    Core home equity portfolio(1) Highlights 2Q19 $12.2 billion HELOC 2Q19 $911 million HELOAN  51% of the HELOC portfolio is secured by 1st lien by Lien position (2) by Lien position (2)  Weighted-average FICO of ~765 2nd  93% of the HELOC portfolio has an LTV of less than 80% 1st 39% 51% 49% 2nd 61

  34. Slide 34: Auto portfolio credit metrics

    Auto portfolio credit metrics Highlights (1) 2Q19 $12.0 billion auto portfolio  Auto finance portfolio – purchase only, no (2) by Refreshed FICO score (1,2) by Origination LTV leasing, weighted-average FICO score % new-car of ~725 < 620 ≥ 120% ~55% < 80% > 800  2Q19 originations of $1.4 billion wi

  35. Slide 35: Core education finance portfolio overview

    Core education finance portfolio overview Highlights 2Q19 $9.1 billion core education finance portfolio  Core education finance portfolio weighted-average (1) by Refreshed FICO by Segment (1) FICO score of ~780 and co-sign rate of ~50%  ~95% of InSchool loans co-signed with weighted- < 620 Educati

  36. Slide 36: Education refinance portfolio overview

    Education refinance portfolio overview Highlights 2Q19 $6.1 billion education refinance portfolio  Education refinance product largely mitigates two greatest student lending risks: by Portfolio  Did the borrower graduate? Citizens ERL  Did the borrower gain employment? 71%  Education refinance p

  37. Slide 37: Consumer unsecured

    Consumer unsecured(1) Highlights 2Q19 $3.3 billion consumer unsecured portfolio  Launched merchant-partnership financing in 3Q15 $s in billions $3.2 $3.2 $3.3 $2.9  Developing strategic partnerships designed around $2.6 high-quality merchant partnership offerings 52% 54% 54%  Partnerships utilize

  38. Slide 38: Commercial Real Estate line of business overview

    Commercial Real Estate line of business overview (1) Highlights 2Q19 $12.1 billion Commercial Real Estate Line of Business  Continued progress in uptiering portfolio to by Facility Type by Property Type larger, more well-capitalized institutional and upper middle market borrowers Land Other CRE col

  39. Slide 39: Citizens vs peer group by total CRE loans – 2Q19

    Citizens vs peer group by total CRE loans – 2Q19(1) $s in billions Total CRE Total CRE Total CRE Total CRE loans/ total Total loans and loans/ loans/ loans/ total risk commercial Total assets leases Total CRE loans total assets total loans based capital loans CFG $163.3 $118.9 $13.8 8.5% 11.6% 74.3%

  40. Slide 40: Appendix – Key performance metrics, Non-GAAP financial measures and reconciliations

    Appendix – Key performance metrics, Non‐GAAP financial measures and reconciliations, GAAP financial summary and footnotes 40

  41. Slide 41: Notes

    Notes Notes on Key Performance Metrics and Non-GAAP Financial Measures See important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, at the beginning and end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and

  42. Slide 42: Notes

    Notes Notes on Key Performance Metrics and Non-GAAP Financial Measures See important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, at the beginning and end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and

  43. Slide 43: Notes

    Notes Notes on Key Performance Metrics and Non-GAAP Financial Measures See important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, at the beginning and end of this presentation for an explanation of our use of these metrics and non-GAAP financial measures and

  44. Slide 44: 2014-2018 GAAP financial summary

    2014-2018 GAAP financial summary $s in millions 2018 2017 2016 2015 2014 Net interest income $ 4,532 $ 4,173 $ 3,758 $ 3,402 $ 3,301 Noninterest income 1,596 1,534 1,497 1,422 1,678 Total revenue 6,128 5,707 5,255 4,824 4,979 Noninterest expense 3,619 3,474 3,352 3,259 3,392 Pre‐provision profit 2,5

  45. Slide 45: 2Q19 GAAP financial summary

    2Q19 GAAP financial summary For The Six Months Ending June 30, Reported 2Q19 change from 2019 Change $s in millions 2Q19 1Q19 2Q18 1Q19 2Q18 2019 2018 2018 $/bps % $/bps % $/bps % Net interest income $ 1,166 $ 1,160 $ 1,121 $ 6 1 % $ 45 4 % $ 2,326 $ 2,212 $ 114 5 % Noninterest income 462 428 388 34

  46. Slide 46: 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 46

  47. Slide 47: 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 47

  48. Slide 48: Non-GAAP reconciliations – Underlying excluding Acquisitions

    Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding Acquisitions $s in millions, except share, per share and ratio data 48

  49. Slide 49: Citizens Financial Group, Inc.

    3« Citizens Financial Group, Inc.”

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