Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (February 2016)
44 slides from Citizens Financial's debt investor presentation, February 2016
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation February 2016 Eric Aboaf, Chief Financial Officer Dave Lindenauer, Treasurer y , Head of Investor Relations Ellen Taylor,
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: Agenda
Agenda Company overview and strategy Improving financial performance Capital/funding p / g and liquidity q y Risk management 2
Slide 4: Company overview and strategy
Company overview and strategy 3
Slide 5: Key investment highlights
Key investment highlights 13th largest U.S. retail bank holding company with attractive Attractive, client‐ demographics in core markets centric franchise Attractive business mix with growing and profitable commercial with ith scale l business complementing strong consumer business Client‐cent
Slide 6: Strong and experienced Board & leadership team
We are led by a strong and experienced Board & leadership team Since September 2014, have attracted or promoted from within 37 new members to our Executive Leadership Group (top 130) Leadership Team Member Title Board Member Committees Bruce Van Saun Chairman and Chief Executive Officer Bruce Van Sa
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension(2) Rank(3) Top 5 deposit market share in 9 of 10 largest MSAs(1) Assets ‐ $138.2 billion #13 Loans ‐ $99.0 billion #12 Deposits ‐ $102.5 billion #12 Manchester,, NH: #1 National Rochester, NY: #4 Bran
Slide 8: Robust product offerings and balanced business mix
Robust product offerings and balanced business mix Commercial Consumer Corporate Banking Retail Deposit Services Commercial Real Estate Mobile/Online Banking Deep client Extensive Franchise Finance Credit/Debit / Card relationships p + product set p Asset Finance Wealth Management
Slide 9: Strong, clean balance sheet funded with low-cost deposits
Strong, clean balance sheet funded with low‐cost deposits Well capitalized with a common equity tier 1 capital ratio of 11.7%(1) on a fully phased‐in Basel III basis Solid asset quality performance with core net charge‐offs of 26 bps in 4Q15 Strong deposit franchise with $84.2 billion of core
Slide 10: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers 4Q15 total capital(1) 15 3% 15.3% 14.7% 14.7% 14.2% 14.1% 13.9% 13.7% Publicly‐stated CET1 targets 13.3% 13.0% 12.7% 12.6% CFG ~11% BBT 9.5‐10.0% FITB 9.0‐9.5% KEY <9.5% MTB <10.0% 11.7% 10.7% 10.1% 10.2% 9.8% 10.9% 10.4% 11.0% 10.5% 9.9% PNC
Slide 11: Improving financial performance
Improving financial performance 10
Slide 12: Building a top-performing regional bank
Building a top‐performing regional bank Where we’ve come from Where we are now Where we’re going Lagging revenue productivity Developed/implemented plan to Well‐balanced Commercial and ─ Under‐levered balance sheet address underlying issues and Consumer business mix ─ Lack of scale in key busi
Slide 13: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives FY15 Initiative Commentary Status New customer households grew ~30 30,000 000 retail checking households in FY15 or by 1 1.3% 3% vs vs. 4Q14 and Reenergize household growth cross‐sell rate increased to 3.23 vs. 3.06. Deposits were up 7% versus prior year
Slide 14: Revenue and balance sheet growth compares well vs. peers
Revenue and balance sheet growth compares well vs. peers FY15 vs. FY14 A scaled platform well‐positioned to drive value Strong loan growth Growing revenues faster Lower NIM compression (Average total loan growth) (Core revenue growth(1)) (Adjusted net interest margin change(1)) CFG Peer average 8% 3
Slide 15: Expense control and key metrics improvement vs. peers
Expense control and key metrics improvement compares well with peers FY15 vs. FY14 Well‐controlled Well controlled expenses Efficiency improvement Acceleratingg p profitabilityy (Core noninterest expense(1) change) (Core efficiency ratio(1) change) (Core net income available to common stockholders(1
Slide 16: FY2016 outlook calls for continued strong growth
FY2016 outlook calls for continued strong growth (1)(2) (1) Adjusted FY2015 guidance vs. Adjusted FY2014 Adjusted FY2015 Actual Results vs. Adjusted FY2014 6% average earning asset growth with 8% average loan Balance sheet Target 5‐7% earning asset growth growth across both consumer and commerci
Slide 17: Loan growth leading expansion
Loan growth leading expansion $s in billions Loan Category (1) FY15 FY15 vs FY14 2016 Outlook Growth rate trend Highlights Commercial Industry Verticals $3.0 35% strong growth Expect Commercial momentum to Franchise Finance 3.2 23% strong growth continue Other(2) 2.7 23% stable ─ Strongest growth
Slide 18: CFG net interest margin improved in 2H15, sustain in 2016
CFG net interest margin improved in 2H15, sustain in 2016 Focusing on optimizing asset growth and minimizing cost of deposits Lower net interest margin compression 3.01% 2.98% 2.96% 2.94% 2.96% 2 bps better than peers 2.80% 2.77% 2.77% 2.76% 2.72% Improving t e d p o g trend 4Q14 1Q15 2Q15 3Q15 4Q1
Slide 19: Loan yield and deposit cost initiatives
Loan yield and deposit cost initiatives Evaluating and refining targeted growth opportunities to drive risk‐adjusted returns Loan portfolio mix strategies Deposit gathering strategies Investing to drive growth in higher‐return Improving advertising strategies through analytics with categories g
Slide 20: We remain positioned for rising rates
We remain positioned for rising rates… …but also see plenty of opportunity to further enhance performance by executing well on our initiatives Interest‐rate sensitivity ranking (1) 13.0% (200 bps gradual increase) Net interest income poised to benefit from rising 10.1% rates ─ ~75% of asset sensit
Slide 21: CFG noninterest income
CFG noninterest income $s in millions Highlights g g FY15 vs 4Q15 vs Growth 2016 Growth rate 2016 outlook reflects improving trends in Noninterest income category FY15 FY14 (1) 4Q14 trend Wealth, Capital Markets, Mortgage and Treasury Solutions Service charges and fees $ 575 2% 8% moderate growth
Slide 22: Capital/funding and liquidity
Capital/funding and liquidity 21
Slide 23: Stronger capital than peers
Stronger capital than peers In 2015, paid $221 million in dividends and Total capital ratio (1) repurchased h d $500 million illi in i common stock t k ─ Dividend payout ratio of 26% 15.8% 15.5% 15.4% 15.3% 15.3% ─ Total payout ratio of 86% 160 bps above peers ─ Total payout yield of 6.8%(3) 14.2%
Slide 24: Consolidated average balance sheet
Consolidated average balance sheet 4Q15 change from Highlights $s in billions 4Q15 3Q15 4Q14 3Q15 4Q14 Linked q quarter: $ % $ % Total earning assets up $1.2 billion (1%), with Investments and interest bearing deposits $ 25.7 $ 25.8 $ 26.5 $ (0.1) — % $ (0.8) (3) % loan growth of $1.4 billion (1.5
Slide 25: High-quality investment portfolio
High‐quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield $24.5 2.59% $24.0 2.59% 89% U.S. Agency MBS $0.9 4.23% $0.9 4.87% $1.4 3.86% $1.2 4.19% 5% AAA‐rated non‐agency Total HTM $3.7 2.23% $4.1 2.33% $0.7 4.94% $0.6 4.93% 19% of total earning assets, in lin
Slide 26: Solid deposit base provides attractive, low-cost funding
Solid deposit base provides attractive, low‐cost funding $98.8 billion 2009 average deposits $101.4 billion 4Q15 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 6% Demand 18% 11% Term 27% 30% Checking 16% with Interest 39% 17% Savings & Checking with 35% Moneyy Market Int
Slide 27: Targeting a more peer-like funding structure
Targeting a more peer‐like funding structure Total Borrowings/Total Liabilities(1) 18.47% 17.15% 16.38% 15.39% 14.28% 12.47% 12.29% 11.58% 8.39% 7.07% 5.85% PNC FITB USB BBT KEY MTB Peer Avg CFG STI RF CMA FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial pa
Slide 28: Risk management
Risk management * Citizens Financial Group, Inc.” 27
Slide 29: Credit expected to remain favorable
Credit expected to remain favorable Credit costs ggraduallyy normalizingg with modest reserve build to fund continued loan growth g Allowance metrics stable NCOs stable, near peer average (Net charge off ratio) 1.28% 1.27% 1.24% 1.23% 1.23% 0.35% 0.33% 0.27% 0.31% 0.31% 1.10 x 1.12 x 1.10 x 1.05 x 1
Slide 30: Diversified and granular loan mix
Diversified and granular loan mix $52.8 billion $46.2 billion 4Q15 portfolio(1) Q retail p 4Q15 Q 5 commercial co e c a po t o o(2) portfolio Business Non‐Core Other Non‐Core 29% Other Banking 0.4% 29% Other Education Finance 2%4% Leases 6% Credit Cards 7% Home 12% Midwest 12% Midwest 9% 3% 33% Equi
Slide 31: Strong credit quality
Strong credit quality Overall portfolio credit metrics have generally trended in line with regional banking peers Core portfolio credit trends are favorable; Non‐Core portfolio has been a drag, but continues to run off Net charge‐offs Non‐performing loans $s in millions $s in billions $1 849 $1,
Slide 32: Core retail portfolio
Core retail portfolio Highlights 4Q15 $50.8 billion core retail portfolio Weighted‐average FICO score of 759 by Product type by Geography 61% of the retail portfolio is > 750 Education Finance Other Core Mortgage – average portfolio FICO of Out of Footprint Cards 2% New England 8% 775 and LTV
Slide 33: Core home equity portfolio
Core home equity portfolio(1) Highlights 4Q15 $14.6 billion HELOC 4Q15 $2.7 billion HELOAN 51% off the th portfolio tf li is i secured b 1st lien d by li by Lien position by Lien position Weighted‐average FICO of 765 84% has an LTV of less than 80% 2nd 1st 32% 48% 4Q15 HELOC originations of
Slide 34: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of December 31, 2015 In no single year is the maturing population balance 2013 ‐ $668 million 2014 ‐ $899 million 2015 ‐ $1.26 billion greater than $2.0 billion Between 2016 and 2018 $4.4 billion ($4.2 billion Core and 3% 2% 1% $153
Slide 35: Auto portfolio credit metrics
Auto portfolio credit metrics $s in billions Highlights(1) 4Q15 $13.5 billion Auto portfolio Auto Finance portfolio – purchase only, by FICO score(1) by LTV no leasing, weighted‐average FICO ≤ 600 601‐649 ≥ 120 ≤ 80 5% score of 735 ≥ 800 8% 11% 16% 22% 4Q15 Q originations g of $ $1.5 billion wit
Slide 36: Commercial portfolio overview
Commercial portfolio overview Highlights 4Q15 $46.2 billion commercial portfolio Asset quality relatively stable and has reached pre‐ by Segment (1) crisis levels Oil & Gas(2) Overall credit risk is moderate and compares well 3% Technology 4% Transportation with peers 4% Food & Beverage 4% – $4.
Slide 37: Non-core portfolio overview
Non‐core portfolio overview $s in billions Non‐core assets Highlights $20.5 $20.5 billion of assets identified as non‐core in June 2009; $17.3 only $2.3 billion remain ─ Down 59% from end of 2012 $13.4 ─ Represents ~2% off total loan portfolio f $8.4 SBO portfolio 72% home equity loans and 28% H
Slide 38: Oil & Gas portfolio overview
Oil & Gas portfolio overview Highlights 4Q15 $1.6 billion Oil & Gas portfolio by Sub‐Sector Oil & gas portfolio reflects exposure to six different subsectors: Integrated Reserve‐Based Upstream (Non‐RBL) Midstream 10% Lending (RBL) 3% Midstream 26% ~$700 million Downstream Downstream 24% most
Slide 39: Appendix
Appendix %£ Citizens Financial Group, Inc.” 38
Slide 40: Estimated impact of 2016 Card Reward Accounting Change
Estimated impact of 2016 prospective Card Reward Accounting Change The following reflects 2016 growth‐rate expectations pre and post the estimated impact of a 2016 prospective Card Reward Accounting Change*, which would have the effect of reducing Card fees and Other operating expense by an estimate
Slide 41: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) FOR THE YEAR ENDED DECEMBER 31, $s in millions 2015 2014 2015 Change from 2014 Net interest income, excluding special items: Net interest income (GAAP) $3,402 $3,301 Less: Special items ‐ ‐ REPORTED NON‐GAAP Net intere
Slide 42: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) FOR THE YEAR ENDED DECEMBER 31, $s in millions 2015 2014 2015 Change from 2014 4Q15 Net Income, excluding restructuring charges and special items: Net income (GAAP) G $840 $865 Add: Restructuring charges and special it
Slide 43: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding Chicago Divestiture) $s in millions FOR THE YEAR ENDED 2015 Change DECEMBER 31,, from 2014 2015 2014 Adjusted net interest margin, excluding Chicago adjustment: Average interest earning assets (GAAP) $122,950 $116,187 Less: Estimated ‐ Chicago adjustment ‐ 51
Slide 44: 3« Citizens
3« Citizens Financial Group, Inc.”
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