Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Debt Investor Presentation (December 2016)
43 slides from Citizens Financial's debt investor presentation, December 2016
Slide 1: Fixed Income Investor Presentation
Fixed Income Investor Presentation December 2016
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: Overview
Overview Company overview and strategy Improving financial performance Capital/funding and liquidity Risk management 2
Slide 4: Company overview and strategy
Company overview and strategy 3
Slide 5: Key investment highlights
Key investment highlights Attractive, 12th largest U.S. bank holding company with attractive demographic client-centric opportunity in core markets franchise with Attractive business mix with improving profitability scale Client-centric model focused on deepening customer relationships Strong,
Slide 6: We are led by a strong and experienced board & leadership team
We are led by a strong and experienced board & leadership team Since January 2015, have attracted or promoted from within ~32% of our Executive Leadership Group (top 137) Leadership Team Member Title Board Member Committees Bruce Van Saun Chairman and Chief Executive Officer Bruce Van Saun Chairman
Slide 7: Solid franchise with leading positions in attractive markets
Solid franchise with leading positions in attractive markets Retail presence in 11 states Dimension(1) Rank(3) Top 5 deposit market share in 9 of 10 largest MSAs(2) Assets: $147.0 billion #12 Loans: $106.0 billion(4) #11 Deposits: $108.3 billion #12 Manchester, NH: #1 Rochester, NY: #5 Branches: ~1,
Slide 8: Robust product offerings and balanced business mix
Robust product offerings and balanced business mix Consumer Commercial Retail Deposit Services Corporate Banking Mobile/Online Banking Commercial Real Estate Credit/Debit Card Deep client Extensive Franchise Finance Wealth Management + relationships product set Asset Finance Home E
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 11.3%(1) on a fully phased-in Basel III basis Strong asset-quality performance with net charge-offs of 32 bps(2) in 3Q16 Robust deposit franchise with $88.9 billion of averag
Slide 10: Improving financial performance
Improving financial performance 9
Slide 11: We are broadly executing well, and our performance is improving
We are broadly executing well, and our performance is improving Key elements of ’13-’16 plan Status Grow balance sheet, Consumer: Auto, Student, Mortgage net interest income Commercial: Middle Market, Mid-corporate & on track Specialty Verticals, CRE, Franchise Finance Grow fee business, Consumer:
Slide 12: Summary of progress on strategic initiatives
Summary of progress on strategic initiatives 3Q16 Initiative Commentary Status Retail checking and primary HHs both up QoQ. Deposits up 2% vs. prior-year quarter and service charges up 3%. Reenergize household growth Continued expansion of Citizens Checkup to help deliver needs-based solutions to ou
Slide 13: 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 — On track to deliver Launched mid 2016 — Targeted run-rate $100 -$105 million annual pre-tax benefit by end of 2016 benefit of
Slide 14: Good execution of plan is driving balance sheet and revenue momentum
Good execution of plan is driving balance sheet and revenue momentum 3Q16 vs. 3Q15 A strong platform well positioned to drive value Strong loan growth Growing revenues faster Higher NIM expansion (Average total loan growth) (Adjusted revenue growth(1)) (Net interest margin change) 7.5% 14.1% 8 bps 3
Slide 15: With continued focus on positive operating leverage and improving returns
With continued focus on positive operating leverage and improving returns 3Q16 vs. 3Q15 Well-controlled expenses; Strong operating leverage Efficiency improvement investing for growth (YoY Adjusted Operating Leverage(1)) (Adjusted efficiency ratio(1) change) (Adjusted noninterest expense(1) change)
Slide 16: 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 2.87% 2.95% 2.88% 2.88% 2.86% 9 bps better than peers 2.76% 2.86% 2.84% 2.84% 2.77% 3Q15 4Q15 1Q16 2Q16 3Q16 CFG Peer average Lower yiel
Slide 17: 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 su
Slide 18: We remain positioned for rising rates
We remain positioned for rising rates… …but also see continued opportunity to enhance performance by executing well on our initiatives Interest rate sensitivity ranking 12.0% (200 bps gradual increase) Net interest income poised to benefit from rising rates ─ ~65-70% of asset sensitivity is center
Slide 19: Capital/funding and liquidity
Capital/funding and liquidity 18
Slide 20: Plans to adjust capital structure but remain above peers
Plans to adjust capital structure but remain above peers 3Q16 total capital comparison Highlights Maintaining substantial capital buffer relative to peers despite FITB 10.2% 14.9% above-peer average stress-test performance Executed $2.0 billion in capital transactions since June 2014, mix MTB 10
Slide 21: 2016 DFAST minimum stressed capital levels substantially above peers
2016 DFAST minimum stressed capital levels substantially above peers Severely Adverse Scenario 4Q15 Common equity tier 1 ratio 4Q15 Total capital ratio 11.7% 15.3% 10.3% 13.6% 151 bps 195 bps 12.3% 8.8% projected above peers projected above peers minimum 10.4% minimum 7.3% CFG Peer Average (1) CFG P
Slide 22: Consolidated average balance sheet
Consolidated average balance sheet 3Q16 change from Highlights $s in billions 3Q16 2Q16 3Q15 2Q16 3Q15 $ % $ % Linked quarter: Investments and interest bearing Total earning assets up $2.2 billion, or 2%, with loan deposits $ 27.1 $ 26.0 $ 25.8 $ 1.1 4 % $ 1.3 5 % growth of $1.4 billion, or 1% Tot
Slide 23: High-quality investment portfolio
High-quality investment portfolio $s in billions Investment portfolio Highlights Yield Yield $25.3 2.41% 90% U.S. Agency MBS $24.1 2.55% $0.9 2.85% $0.8 4.92% $1.0 4.10% 4% AAA-rated non-agency $1.2 4.08% Total HTM $4.3 2.40% $4.1 2.33% $0.4 5.32% 19% of total earning assets, in line with peer
Slide 24: Solid deposit base provides attractive, low-cost funding
Solid deposit base provides attractive, low-cost funding $98.8 billion 2009 average deposits $106.6 billion 3Q16 average deposits 68% Core(1) 83% Core(1) Wholesale Wholesale Term 1% Demand 6% Demand 18% 11% 26% Term 30% Checking 16% with Interest 39% 18% Savings & Checking with 35% Money Market Inte
Slide 25: Targeting a more peer-like funding structure
Targeting a more peer-like funding structure Total Borrowings/Total Liabilities(1) 16.7% 16.5% 14.2% 13.7% 12.7% 12.3% 12.0% 10.1% 9.7% 9.3% 5.8% FITB PNC BBT USB CFG KEY Peer Avg STI MTB CMA RF FHLB advances Repurchase agreements sold Fed funds purchased Trading liabilities Commercial paper Subordi
Slide 26: Risk management
Risk management %£ Citizens Financial Group, Inc” 25
Slide 27: Diversified and granular loan mix
Diversified and granular loan mix $55.1 billion $50.7 billion 3Q16 retail portfolio 3Q16 commercial portfolio Non-Core Business Other Out of Banking Non-Core Out of 25% footprint(1,2) 34% Education Finance 3% Leases 2% 6% footprint 3% Home Credit Cards 10% 14% Midwest 6% Equity 12% 3% 29% Midwest 35
Slide 28: 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 $2.
Slide 29: Credit expected to remain favorable
Credit expected to remain favorable Credit costs gradually normalizing with modest reserve build to fund continued loan growth Allowance metrics stable NCOs stable, comparable to peer average (Net charge-off ratio) 1.23% 1.23% 1.21% 1.20% 1.18% 0.36% 0.35% 0.31% 0.31% 0.32% 1.12 x 1.10 x 1.09 x 1.14
Slide 30: Core retail portfolio
Core retail portfolio Highlights 3Q16 $53.4 billion core retail portfolio Weighted-average core FICO score of 760 by Product type by Geography(1) by refreshed FICO(1) 63% of the retail portfolio has a FICO score Education Other <600 of >750 Out of New 600-649 Finance 3% 3% Home Footprint England
Slide 31: Core home equity portfolio
Core home equity portfolio(1) Highlights 3Q16 $14.2 billion HELOC 3Q16 $2.0 billion HELOAN 52% of the portfolio is secured by 1st lien by Lien position(2) by Lien position (2) Weighted-average FICO of 766 86% has an LTV of less than 80% 2nd 1st 34% 3Q16 HELOC originations of $1.3 billion 50%
Slide 32: HELOC payment shock management
HELOC payment shock management Highlights Maturing vintages as of September 30, 2016 In no single year is the maturing population balance 2013 – $668 million 2014 – $899 million 2015 – $1.26 billion greater than $1.6 billion 5% 2% 4% 3% 3% 3% 4% 2% 6% Between 2016 and 2018, $3.0 billion ($2.9 bi
Slide 33: Core mortgage portfolio overview
Core mortgage portfolio overview Highlights 3Q16 $14.4 billion core mortgage portfolio Jumbo mortgages originated primarily within the (1) (1) Bank’s lending footprint by Refreshed CLTV by Refreshed FICO <600 600-649 90-100% 100%+ Predominately in-footprint with a 80-89% 2% 4% 1% 2% 6% 650-699 w
Slide 34: Auto portfolio credit metrics
Auto portfolio credit metrics $s in billions Highlights(1) 3Q16 $14.1 billion Auto portfolio Auto Finance portfolio – purchase only, no by Refreshed FICO score (1,2) by Origination LTV (2) leasing, weighted-average FICO score ≤ 600 of 731 % new car ≥ 120% ≤ 80% ≥ 800 5% 601-649 64% 12% − 3Q16 orig
Slide 35: Core education finance portfolio overview
Core education finance portfolio overview Highlights 3Q16 $5.7 billion core education finance portfolio Core education finance portfolio average FICO score of 773 (1) by Refreshed FICO by Segment and co-sign rate of 51% Acquired <650 650-699 portfolios InSchool 95% of InSchool loans co-signed wi
Slide 36: Core commercial portfolio overview
Core commercial portfolio overview Highlights 3Q16 $49.4 billion core commercial portfolio Asset quality relatively stable and has reached by Industry Sector (1) pre-crisis levels Overall credit risk is moderate and compares well All Other(3) with peers Lessors 12% Real Estate Retailers 2% 21% –
Slide 37: Commercial Real Estate line of business overview
Commercial Real Estate line of business overview Highlights 3Q16 $9.8 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 and Land upper middle market borrowers Construction 2
Slide 38: Oil & Gas portfolio overview
Oil & Gas portfolio overview 3Q16 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 $330 million of corporate aircraft leases arising from Asset Finance Les s pri ce-s ens i t
Slide 39: Non-core portfolio overview
Non-core portfolio overview $s in billions Highlights Non-core assets $20.5 billion legacy non-core portfolio identified in June 2009 with $20.5 only $1.8 billion remaining; in September 2016, transferred an additional $1.2 billion of commercial loans and leases, largely $17.3 investment-grade air
Slide 40: Appendix
Appendix %£ Citizens Financial Group, Inc” 39
Slide 41: 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 (dollars in millions) QUARTERLY TRENDS 3Q16 3Q15 3Q16 Change from 3Q15 $/bps %/bps Noninterest income, adjusted: Noninterest income (GAAP) $435 $353
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 (dollars in millions) QUARTERLY TRENDS 3Q16 Change 3Q16 3Q15 from 3Q15 $/bps Return on average tangible common equity and return on average tangible
Slide 43: Citizens Financial Group, Inc.
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