Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — FY2016 Earnings Presentation
49 slides from Citizens Financial's earnings presentation, Jan 20, 2017
Slide 1: 4Q16 and FY2016 Financial Results
4Q16 and FY2016 Financial Results January 20, 2017
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. Any statement that does not describe historical or current facts is a forward-looking statement
Slide 3: Table of contents
Table of contents page 4Q16 highlights 4 4Q16 Adjusted financial summary 7 Adjusted FY2016 performance vs. guidance 25 FY2017 outlook 26 1Q17 outlook 31 Appendix 1 – Additional 2016 information 33 Appendix 2 – Key performance metrics, 41 Non-GAAP Financial Measures and reconciliations 3
Slide 4: 4Q16 highlights
4Q16 highlights Diluted EPS of $0.55 up 31% from 4Q15; down 2% from 3Q16 and up 6% from Adjusted(1) 3Q16 levels Improving Revenue of $1.4 billion, up 11% YoY and down 1% QoQ; Adjusted revenue(1) up 4% QoQ profitability and Positive operating leverage YoY of 6% - efficiency ratio improved ~3.6
Slide 5: Restructuring charges, special items and/or notable items
Restructuring charges, special items and/or notable items $s in millions, except per share data 2016 GAAP results include a net $19 million after-tax benefit tied to the 3Q16 TDR Transaction gain, partially offset by other costs associated with Asset Finance repositioning, TOP III efficiency initiat
Slide 6: GAAP financial summary
GAAP financial summary Highlights 4Q16 change from LQ excluding $s in millions 4Q16 3Q16 4Q15 3Q16 4Q15 notable Linked quarter: $ % $ % items(1) Net income available to common stockholders down 3% and EPS Net interest income $ 986 $ 945 $ 870 $ 41 4 % $ 116 13 % down 2% from 3Q16 levels that inclu
Slide 7: 4Q16 Adjusted financial summary
4Q16 Adjusted financial summary(1) 4Q16(1) change from Highlights Linked quarter: 4Q16 3Q16 Reported Adjusted Reported Net income available to common stockholders(1) of $282 million $s in millions Reported Adjusted(1) 4Q15 3Q16 4Q15 increased $11 million, or 4%, from Adjusted 3Q16 levels(1) Net in
Slide 8: 2016 GAAP financial summary
2016 GAAP financial summary YoY excluding 2016 change from 2015 restructuring $s in millions 2016 2015 $ % charges/ Highlights Net interest income $ 3,758 $ 3,402 $ 356 10 % notable 5 items(1) Noninterest income 1,497 1,422 75 FY16 vs FY15: Total revenue 5,255 4,824 431 9 8% Net income available
Slide 9: Adjusted 2016 financial summary
Adjusted 2016 financial summary(1) 2016 2015 2016 change from 2015 $s in millions Adjusted(1) Adjusted(1) $ % Highlights Net interest income $ 3,758 $ 3,402 $ 356 10 % Noninterest income 1,430 1,422 8 1 FY16 vs FY15: Total revenue 5,188 4,824 364 8 Net income available to common stockholders up $1
Slide 10: Net interest income
Net interest income $s in millions, except earning Net interest income Highlights assets $132B $135B Linked quarter: $126B $129B $124B NII up $41 million, or 4% ─ Reflects 2% average loan growth driven by commercial, mortgage, other unsecured retail and student loans NIM of 2.90% improved 6 bps
Slide 11: Net interest margin
Net interest margin NIM walk 3Q16 to 4Q16 0.03% (0.01)% (0.01)% 0.05% 2.84% 2.90% 3Q16 NIM% Loan Borrowing Deposit Investment 4Q16 NIM% yields costs/other costs portfolio yield/growth NIM walk 4Q15 to 4Q16 0.21% 0.01% (0.03)% (0.06)% 2.90% 2.77% 4Q15 NIM% Loan Borrowing Deposit Investment 4Q16 NIM%
Slide 12: Noninterest income
Noninterest income $s in millions 4Q16 change from Highlights 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Noninterest income decreased $58 million, or 13%, from 3Q16 levels Service charges and fees $ 153 $ 152 $ 156 $ 1 1 % $ (3) (2) % that included a $67 million benefit from notable items in
Slide 13: Noninterest expense
Noninterest expense $s in millions Highlights 4Q16 change from 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Noninterest expense decreased $20 million, or 2%, from 3Q16 levels that included $36 million of notable items Salaries and benefits $ 420 $ 432 $ 402 $ (12) (3) % $ 18 4 % ─ Adjusted non
Slide 14: Consolidated average balance sheet
Consolidated average balance sheet 4Q16 change from Highlights $s in billions 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Total earning assets up $3.1 billion, or 2%, with loan Investments and interest bearing growth of $2.5 billion, or 2% deposits $ 27.7 $ 27.1 $ 25.7 $ 0.6 2 % $ 2.0 8 % Tot
Slide 15: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $56.2B Linked quarter: $54.0B $55.0B $52.5B $53.5B Average loans increased $1.2 billion, or 2%, largely reflecting $2.6 $3.0 $2.5 growth in residential mortgages, student and other unsecured $2.6 $2.5 $2.9
Slide 16: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Growth rate Average loans and leases excluding 3Q16 impact of lease Highlights portfolio move to $45.9B $46.5B $46.9B non-core(1) Linked quarter: $43.8B 3% Average loans up $371 million, or 1%, as continued strength in $42.5B $3.5 $3.3 $
Slide 17: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $121.0B $124.3B $119.0B Linked quarter: $114.0B $115.9B $11.0 Total average deposits up $2.5 billion, or 2% $10.3 $10.9 $3.2 $6.0 $9.9 $2.6 $1.0 $3.7 $0.9 ─ Largely growth in demand deposits, m
Slide 18: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Net charge-offs (recoveries) Highlights $104 Overall credit quality continued to improve, reflecting the benefit of growth in high quality lower $6 risk retail loans and stabilization in commercial $83 $83 $82 $77 NPLs to total loans and lease
Slide 19: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 4Q15 1Q16 2Q16 3Q16 4Q16 Capital levels remain above regional peers (1,2) Basel III transitional basis Common equity tier 1 capital $ 13.4 $ 13.6 $ 13.8 $ 13.8 $ 13.8 4Q16 Basel III common equity tier 1 ratio (trans
Slide 20: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives FY16 Initiative Commentary Status Primary HHs up YoY. Citizens Checkup helped drive ~400,000 appointments in FY16 with focus on deepening Reenergize household growth relationships with mass affluent and affluent customers. Strong momentum in scaling the b
Slide 21: Self funding necessary investments through our efficiency initiatives
Self funding necessary investments through our efficiency initiatives Tapping Our Potential (TOP) programs remain on track TOP II Program TOP III Program Launched mid 2015 — Delivered $105 million in annual pre-tax Launched mid 2016 — Targeted run-rate benefit for 2016 benefit of $100-$115 million b
Slide 22: Consistently enhancing our capabilities and gaining market share
Consistently enhancing our capabilities and gaining market share Consumer Commercial Continued strong focus on customer experience Continued leading customer satisfaction scores(6) ─ Consistent customer branch experience; scores 10% above ─ Overall satisfaction indicates continued progress in se
Slide 23: Making consistent progress against our financial goals
Making consistent progress against our financial goals Goal is to deliver a 10%+ run-rate ROTCE in the medium term Key Indicators Medium-term 8.02% 8.43% Targets Adjusted 6.28% 6.22% 6.76% 6.73% 6.67% 6.60% 6.75% 6.61% 7.30% 5.24% 5.24% 10%+ ROTCE(1) 4.34% Adjusted return on 0.68% 0.66% 0.69% 0.69%
Slide 24: Keys to successful 2017 financial performance
Keys to successful 2017 financial performance Expect improved economic environment with steady GDP growth, solid loan demand, and gradual rate hikes Drive strong, prudent loan growth across consumer and commercial Deliver improving NIM with continued focus on asset optimization and gathering low
Slide 25: FY2016 performance vs. guidance
FY2016 performance vs. guidance Results reflect strong execution against targets Adjusted FY2016 guidance vs. Adjusted FY2015(1,2) Adjusted FY2016 actual results vs. Adjusted FY2015(1) Balance sheet 5-6% average earning asset growth 6% average earning asset growth growth 6-8% average loan gr
Slide 26: FY2017 outlook
FY2017 outlook Adjusted FY2016(1) FY2017 expectations vs. Adjusted FY2016(1) $130.5 billion average earning assets 5.5-6.5% average earning asset growth Balance sheet $103.4 billion average loans 5.5-7% average loan growth growth $105.4 billion average deposits 5.5-7% average deposit gro
Slide 27: FY2017 outlook compared with 2016
FY2017 outlook compared with 2016 Adjusted 2016 vs. Adjusted 2015(1) FY2017 expectations vs. Adjusted 2016(1) 6% average earning asset growth 5.5-6.5% average earning asset growth Balance sheet 5.5-7.0% average loan growth 8% average loan growth growth 6% average deposit growth 5.5-7.0%
Slide 28: NIM drivers and growth
NIM drivers and growth Comments Some additional benefit from shift in loan mix to higher return products Earning asset mix Reduced back book runoff helping to mitigate competitive commercial and yields pricing dynamics Enhanced customer product offerings targeted at mass affluent and Deposit/
Slide 29: Strong growth in net interest income
Strong growth in net interest income Net interest income growth 2015-2016 6.2% (1.2)% (0.4)% (0.3)% 6.1% $3,758 $3,402 2015 Loan growth Loan mix/ Investment Deposit Borrowings/ 2016 yields portfolio costs other (1) NIM% 2.75% 0 bps +16 bps (3) bps (1) bps (1) bp 2.86% Net interest income outlook 201
Slide 30: Noninterest expense remains well controlled
Noninterest expense remains well controlled $s in millions Adjusted noninterest expense(1) trend 2015-2016 0.9% (2.1)% 0.7% 2.0% 1.8% $3,316 $3,209 5.5% Adjusted 2015(1) Other salaries & Business growth Outside services, Equipment and Efficiency initiatives Adjusted 2016 (1) employee benefits initia
Slide 31: 1Q17 outlook
1Q17 outlook 1Q17 expectations vs. 4Q16 Net interest ~1.5% loan growth income, net Expect ~2-3 basis point improvement in net interest margin given recent rate rise interest margin Day count impact of ~$14 million decrease to NII Noninterest Seasonally lower, particularly capital markets and
Slide 32: Key messages
Key messages Citizens once again delivered strong results in 4Q16 ─ Strong EPS growth, robust operating leverage, improving efficiency ratio and active capital management ─ ROTCE of 8.4% up from 4.3% three years ago in 3Q13 ─ Delivering against strategic initiatives with strong growth in Capital M
Slide 33: Appendix 1 – Additional 2016 information
Appendix 1 – Additional 2016 information 33
Slide 34: Linked-quarter results
Linked-quarter results Pre-provision profit Period-end loans (2) Asset return metrics $s in millions $s in billions $513 $516 1% 2% 0.86% 7 bps $482 $105.5 $107.7 0.80% 0.79% 7% 1 bps 3Q16 4Q164Q16 3Q16 4Q16 3Q16 4Q164Q16 GAAP results Return on average total tangible assets Adjusted results
Slide 35: Quarter-over-quarter results
Quarter-over-quarter results Pre-provision profit Period-end loans (1) Return on average total $s in millions $s in billions tangible assets $s in billions $516 22% $107.7 9% 0.79% 12 bps $99.0 0.67% $422 4Q15 4Q16 4Q15 4Q16 4Q15 4Q16 Net income and EPS Period-end deposits Return on average ta
Slide 36: Full-year results
Full-year results Pre-provision profit Period-end loans (2) Asset return metrics $s in millions $s in billions $1,903 $1,872 22% $107.7 9% 0.76% 0.75% 11 bps $99.0 $1,565 $1,615 16% 0.65% 0.68% 7 bps 2015 2016 2015 2016 2015 2016 GAAP results Return on average total tangible assets Adjuste
Slide 37: Consumer Banking segment
Consumer Banking segment 4Q16 change from Highlights $s in millions 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Net income was relatively flat Net interest income $ 639 $ 621 $ 565 $ 18 3 % $ 74 13 % Net interest income up $18 million, or 3%, led by higher mortgage, Noninterest income 227 2
Slide 38: Commercial Banking segment
Commercial Banking segment 4Q16 change from Highlights $s in millions 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Commercial Banking net income increased $10 million, or 6% Net interest income $ 347 $ 327 $ 301 $ 20 6 % $ 46 15 % Total revenue increased $19 million, or 4%, driven by higher
Slide 39: Other
Other 4Q16 change from Highlights $s in millions 4Q16 3Q16 4Q15 3Q16 4Q15 Linked quarter: $ % $ % Other recorded net income of $18 million, down $25 million, Net interest income $ — $ (3) $ 4 $ 3 100 % $ (4) (100) % largely driven by the net impact of notable items(1) recorded Noninterest income 2
Slide 40: Oil & Gas portfolio overview
Oil & Gas portfolio overview 4Q16 Oil & Gas outstandings Highlights Well-diversified portfolio with ~100 clients Tota l Uti l i zed Cri ti ci zed Nona ccrua l $s i n mi l l i ons O/S % % s ta tus Includes $326 million of corporate aircraft leases arising from Asset Finance Les s pri ce-s ens i t
Slide 41: Appendix 2 – Key performance metrics, Non-GAAP Financial Measures and reconciliations
Appendix 2 – Key performance metrics, Non-GAAP Financial Measures and reconciliations 41
Slide 42: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $ % $ % $
Slide 43: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $/bps % $
Slide 44: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $/bps % $
Slide 45: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations (Adjusted excluding restructuring charges, special items and/or notable items) $s in millions, except per share data QUARTERLY TRENDS FULL YEAR 4Q16 Change 2016 Change 4Q16 3Q16 2Q16 1Q16 4Q15 3Q16 4Q15 2016 2015 2015 $ % $ % $
Slide 46: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions THREE MONTHS ENDED DEC 31, THREE MONTHS ENDED SEPT 30, THREE MONTHS ENDED JUNE 30, 2016 2016 2016 Consumer Commercial Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Oth
Slide 47: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions FULL YEAR 2016 2015 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income available to common stockholders: Net income (loss) (GAAP) A $345 $631
Slide 48: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions FOR THE THREE MONTHS ENDED DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, JUNE 30, MAR. 31, DEC. 31, SEP. 30, 2016 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014
Slide 49: Citizens Financial Group, Inc.
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Citizens Financial Group — FY2016 Earnings Presentation on 6ix