Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2018 Earnings Presentation
31 slides from Citizens Financial's earnings presentation, Oct 19, 2018
Slide 1: 3Q18 Financial Results
3Q18 Financial Results October 19, 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: 3Q18 highlights
3Q18 highlights Net income available to common of $436 million, up 28% YoY and 3% QoQ; EPS of $0.91, up 34% YoY and 3% QoQ ─ Results reflect the impact of the August 1, 2018 acquisition of Franklin American Mortgage Company (“FAMC”) and $7 million of after-tax notable items ─ Underlying net income
Slide 4: Notable Items
Notable Items(1) 3Q18 reported results included $9 million in pre-tax integration costs associated with the August 1, 2018 FAMC acquisition. (1) 3Q18 Notable items 3Q18 ($s in millions, except per share data) Pre‐tax After‐tax EPS impact FAMC integration costs Salaries & benefits $ (5) $ (4) $ (0.01
Slide 5: GAAP financial summary
GAAP financial summary 3Q18 change from Highlights YoY $s in millions 3Q18 2Q18 3Q17 2Q18 3Q17 Underlying YoY Linked quarter: $ % $ % Underlying(1) excluding Net interest income $1,148 $1,121 $1,062 $ 27 2% $ 86 8% FAMC(1) Net income available to common stockholders up Noninterest income 416 388 3
Slide 6: 3Q18 Underlying financial summary
3Q18 Underlying financial summary(1) 3Q18 change from Highlights 3Q18 YoY 2Q18 3Q17 2Q18 3Q17 Linked quarter: (1) Underlying $s in millions Underlying Reported Reported Reported Reported excluding Underlying net income available to common stockholders FAMC(1) Net interest income $ 1,148 $ 1,121 $
Slide 7: Net interest income
Net interest income $s in millions, except earning assets Net interest income Highlights Linked quarter: $137.5B $138.4B $138.7B $140.5B $142.2B NII up $27 million, or 2% ─ Reflects 1% average loan growth and increase in NIM NIM of 3.19% up from 3.18%, and reflected a 1 bp reduction tied to the
Slide 8: Noninterest income
Noninterest income $s in millions Highlights 3Q18 change from Linked quarter: 3Q18 2Q18 3Q17 2Q18 3Q17 Noninterest income up $28 million, or 7%, including a $24 $ % $ % million impact of the FAMC acquisition; Underlying noninterest Service charges and fees $ 131 $ 127 $ 131 $ 4 3 % $— — % income e
Slide 9: Noninterest expense
Noninterest expense $s in millions 3Q18 change from Highlights 3Q18 2Q18 3Q17 2Q18 3Q17 $ % $ % Linked quarter: Salaries and benefits $ 474 $ 453 $ 438 $ 21 5% $ 36 8% Noninterest expense up $35 million, or 4%, including Occupancy 81 79 78 2 3 3 4 a $34 million impact of FAMC acquisition and notab
Slide 10: Average Loans and Leases
Average Loans and Leases Average core loans and leases YoY Loan Growth Highlights Total Core Linked quarter: $111.0B $112.2B $107.3B $108.4B $109.2B 5% Average core loans and leases up $1.2 billion, or 1% ─ Core retail up $453 million, with growth in residential mortgage, unsecured and education
Slide 11: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $130.7B $132.7B Linked quarter: $127.5B $128.6B $129.1B Total average deposits up $1.9 billion, or 2% $12.8 Total long-term borrowings $11.7 $13.5 $13.4 Largely reflects growth in term deposits
Slide 12: 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 $86 $78 $78 $78 $72 $76 NPLs to total loans and le
Slide 13: Capital and liquidity remain strong
Capital and liquidity remain strong Highlights as of Capital levels remain at the higher end of the range $s in billions (period-end) 3Q17 4Q17 1Q18 2Q18 3Q18 for regional peers (1) Basel III basis Common equity tier 1 capital $ 14.1 $ 14.3 $ 14.4 $ 14.6 $ 14.4 3Q18 CET1 ratio of 10.8% down 0.4%
Slide 14: Strategic initiatives update
Strategic initiatives update NIM up 15 bps YoY excluding FAMC; ~5 bps of this is from our BSO efforts excluding FAMC(1) Strategic & business highlights Balance Sheet Optimization Grow more attractive Core Education, personal unsecured and merchant risk-adjusted financing up 20% YoY return port
Slide 15: Balancing investment for long-term with need to deliver consistently improving results
Balancing investment for long-term with need to deliver consistently improving results Investing in enhanced data analytics capabilities to enable increased personalization, improved insights, and stronger customer value propositions Creating a partner ecosystem with FinTechs to expedite product
Slide 16: Making consistent progress against our financial goals
Making consistent progress against our financial goals Medium-term Key Indicators targets ~13 - 15% Adjusted/ 13.5% 11.7% 12.9% Underlying 6.8% 6.7% 6.7% 6.6% 6.8% 6.6% 7.3% 8.0% 8.4% 9.0% 9.6% 10.1% 10.4% 13.3% ROTCE(1) 4.3% 5.2% 5.2% 6.3% 6.2% Adjusted/ Underlying 70% 68% 68% 69% 68% 67% 68% 67% 6
Slide 17: 4Q18 outlook
4Q18 outlook 4Q18 Underlying outlook 3Q18 Underlying results(1) (excludes expected notable items) Net interest $114.0 billion average loans ~1-1.25% average loan growth income, net 3.19% NIM ~3-4 bps in NIM expansion interest margin Noninterest $416 million; $392 million ~5-7% increase;
Slide 18: Key messages
Key messages Strong 3Q18 results demonstrate continuing disciplined execution ─ Driving attractive top-line growth coupled with strong expense management ─ Delivered Underlying EPS growth of 37% YoY, with Underlying ROTCE improvement to 13.5%(1) ─ Underlying operating leverage excluding FAMC of 4.
Slide 19: Appendix
Appendix %£ Citizens Financial I Group, Inc. 18
Slide 20: 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 $663 Underlying $114.0 4% $112.9 $117.0 4% $109.5 13% $585 $654 12% 3Q17 3Q18 3Q17 3Q18 3Q17 3Q18 Net income available to Return on average total Return on average tangi
Slide 21: Linked-quarter results
Linked-quarter results Average loans(1) Average deposits Pre-provision profit $s in billions $s in billions $s in millions 1% $115.1 $117.0 2% $663 Underlying $112.9 $114.0 $634 5% $654 3% 2Q18 3Q18 2Q18 3Q18 2Q18 3Q18 Net income available to Return on average total Return on average tangibl
Slide 22: 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 21
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 – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC $s in millions, except share, per share and ratio data 26
Slide 28: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC $s in millions, except share, per share and ratio data 27
Slide 29: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC $s in millions, except share, per share and ratio data 28
Slide 30: Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC
Key performance metrics, Non-GAAP financial measures and reconciliations – Underlying excluding FAMC $s in millions, except share, per share and ratio data 29
Slide 31: Citizens Financial Group, Inc.
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