Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — FY2015 Earnings Presentation
52 slides from Citizens Financial's earnings presentation, Jan 22, 2016
Slide 1: 4Q15 and FY 2015 Financial Results
4Q15 and FY 2015 Financial Results January 22, 2016
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: Table of contents
Table of contents page 4Q15 highlights 3 Adjusted financial summary 6 Adjusted FY2015 performance vs. guidance 18 FY2016 outlook l k 25 1Q16 outlook 26 pp Appendix 1 – 2015 28 Appendix 2 – 2016 outlook 37 Appendix 3 – Non‐GAAP reconciliation 42 2
Slide 4: 4Q15 highlights
4Q15 highlights Adjusted j diluted EPS of $0.42 up p 5% from 3Q15 and up p 8% from Adjusted j (1) diluted 4Q14 Improving Operating leverage of 2% YoY profitability and NIM improved to 2.77% from 2.76% in 3Q15 returns Adjusted ROTCE of 6.7%, with efficiency ratio of 66% improving from Adjuste
Slide 5: Financial summary – GAAP
Financial summary – GAAP Quarterly trend Full year Highlights 4Q15 change from 2015 change $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 2015 2014 from 2014 Linked quarter: Net interest income $ 870 $ 856 $ 840 $ 14 $ 30 $ 3,402 $ 3,301 $ 101 GAAP net income up slightly Noninterest income 362 353 339 9
Slide 6: Restructuring charges and special items
Restructuring charges and special items GAAP results included restructuring charges and special items related to enhancing efficiencies and improving processes across the organization and separation from The Royal Bank of Scotland Group plc (“RBS”). (1) Restructuring charges and special items 4Q15 c
Slide 7: Adjusted financial summary excluding restructuring charges and special items
Adjusted financial summary ‐ excluding restructuring charges and special items(1) Highlights 4Q15 change from $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 Linked q quarter: $ % $ % Net income was relatively stable, as revenue growth was Net interest income $ 870 $ 856 $ 840 $ 14 2 % $ 30 4 % largely of
Slide 8: Adjusted full year financial summary
Adjusted full year financial summary ‐ excluding restructuring charges and special items(1) Excluding the estimated 2015 change from impact of $s in millions 2015 2014 2014 Chicago $ % Divestiture(6) Hi hli ht Highlights Net interest income $ 3,402 $ 3,301 $ 101 3 % 4% Adjusted net income increa
Slide 9: Net interest income
Net interest income $s in millions, except earning Net interest income Highlights assets $ $121B $123B $123B $124B Linked quarter: $119B NII up $14 million, or 2% ─ Reflects $1.4 billion increase in average loans and leases, improving loan yields and lower deposit costs, $856 $870 partially offset
Slide 10: Net interest margin
Net interest margin NIM walk 3Q15 to 4Q15 0.01% 0.01% (0.01%) 2.76% 2.77% 3Q15 NIM% Loan Lower deposit Other 4Q15 NIM% yields costs NIM walk 4Q14 to 4Q15 0.01% (0.01%) (0.03%) 2.80% 2.77% 4Q14 NIM% Investment Loan yields 1H15 higher deposit 4Q15 NIM% portfolio yields/ costs pay‐fixed swap run off/ t
Slide 11: Noninterest income
Noninterest income $s in millions 4Q15 change from Highlights 4Q15 3Q15 4Q14 3Q15 4Q14 Linked quarter: $ % $ % Noninterest income up $9 million led by Service charges and fees $ 156 $ 145 $ 144 $ 11 8 % $ 12 8 % higher service charges and fees Card fees 60 60 58 — — 2 3 Trust & investment services
Slide 12: Adjusted noninterest expense
Adjusted noninterest expense – excluding. restructuring charges and special items(1) 4Q15 change from Highlights $ iin millions $s illi 4Q15 3Q15 4Q14 3Q15 4Q14 Linked quarter: $ % $ % Adjusted salaries and benefits (1) $ 404 $ 404 $ 396 $ — — % $ 8 2 % Adjusted noninterest expense(1) up $12 Adjus
Slide 13: 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 14: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $50.7B $51.6B $52.5B Linked quarter: $49.2B $50.1B $2.4 $2.6 Average loans increased $896 million, or 2%, $2.5 $2.3 $2.6 $3.0 $3.0 largely reflecting strength in mortgage, student $3.1 $3.1 $3.0 $2 7 $2.7
Slide 15: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $41.3B $41.8B $42.5B Linked quarter: $40.1B $38.9B $3.1 $3.1 Average loans up $721 million, or 2%, with solid $2.8 $2.4 $2.6 growth in CRE, Mid‐Corporate and Franchise Finance $7.7 $8.2 $ $8.5 Loan L y
Slide 16: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest‐bearing interest bearing liabilities and DDA Highlights $113.3B $113.0B $114.0B Linked quarter: $108.8B $111.2B $3.9 $3.9 $4.1 $6.0 Total average deposits up $378 million $2.8 $6.5 $5.1 $5.0 $6.1 $7.0 $2.9 $1.6 $4.6 $4.4 ─ DDA up $7
Slide 17: Strong credit quality trends continue
Strong credit quality trends continue $s in millions Net charge‐offs (recoveries) Highlights Overall credit quality remains strong. NPLs declined by $80 $78 $75 $77 $41 million or 4% YoY $54 $6 $7 $3 $4 $7 Net charge‐offs of $77 million, or 0.31% of average loans and $72 $69 $68 $66 $73 leases r
Slide 18: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period‐end) 4Q14 1Q15 2Q15 3Q15 4Q15 (1,2) Capital levels remain above regional peers Basel I/III transitional basis Basel I Basel III Common equity tier 1 capital $ 13.2 $ 13.4 $ 13.3 $ 13.2 $ 13.4 4Q15 Basel III common equity
Slide 19: FY2015 performance vs. guidance
FY2015 performance vs. guidance Results largely in line; lower revenue offset by favorable expenses and credit costs (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 growth
Slide 20: 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 21: Aspire to be a top-performing regional bank
Aspire to be a top‐performing regional bank, delivering well for all stakeholders Colleagues Regulators Customers Investors Communities Co u es & Soc Society ey Customer‐centric culture 20
Slide 22: Getting to top-performing
Getting to top‐performing Our plan has clear objectives for each stakeholder Achieve current targets, then raise the bar Investors Strive for consistency in performance, limit tail risk Target relatively high pay‐out pay out ratio ratio, steady and growing dividend Continue to improve custom
Slide 23: Making consistent progress against our financial goals
Making consistent progress against our financial goals Goal is to deliver a 10%+ run‐rate run rate ROTCE in the medium term Medium‐term Key Indicators 2011 2013 2014 2015 Targets Return on average tangible common equity (“ROTCE”) (1) 4.2% 4.9% 6.7% 6.4% 10%+ 10% Adjusted ROTCE(1) 4.5% 5.1% 6.1% 6.7%
Slide 24: Keys to successful 2016
Keys to successful 2016 Financial Performance Expect positive market environment with steady GDP growth, solid loan demand, and gradual rate hikes Drive strong loan growth across consumer and commercial Deliver underlying NIM stability/gradual rise in 2016, consistent with 2H15 performance ─ Fur
Slide 25: Keys to successful 2016 (continued)
Keys to successful 2016 (continued) Customers Further embed customer‐centric mindset within the organization Leverage customer insights to continue progress on key loyalty metrics and business measures ─ Consumer: Drive household growth and cross‐sell by leveraging targeting strategies towards i
Slide 26: FY2016 outlook
FY2016 outlook FY2016 expectations vs. Adjusted FY2015(1) 5‐6% average earning asset growth Balance sheet 6‐8% average loan growth growth 5‐7% average deposit growth Net interest Net interest income growth h off 7‐10% % income, net NIM improvement of 6‐12 bps interest margin Noninterest
Slide 27: 1Q16 outlook
1Q16 outlook 1Q16 expectations vs. vs 4Q15 Net interest 1.5‐2.0% loan growth income, net Expect ~5 basis point improvement in net interest margin given recent rate rise interest margin g Day y count impact p of ~$6 $ million decrease to NII Noninterest Down modestly given seasonality in serv
Slide 28: Key messages
Key messages Citizens Citi is i an attractive tt ti ffranchise hi with ith greatt potential t ti l ─ We have a plan to become a top‐performing regional bank ─ To date, we are executing well against that plan ─ We are mindful of building it ‘right’ for the long‐term while delivering tangible financ
Slide 29: Appendix 1 – 2015
Appendix 1 — 2015 %£ Citizens Financial Group, Inc.” 28
Slide 30: Quarter over quarter results
Quarter over quarter results Adjusted pre‐provision profit (1) Period‐end loans(2) Adjusted return on average $s in millions $s in billions tangible ibl assets(1) $422 9% $99.0 6% 2 bps $388 $93.4 0.69% 0.67% 4Q14 4Q15 4Q14 4Q15 4Q14 4Q15 Adjusted net income(1) Period‐end deposits Adjusted ret
Slide 31: Linked quarter results
Linked quarter results Adjusted pre‐provision profit (1) Period‐end loans(2) Adjusted return on average $s in millions $s in billions tangible ibl assets(1) $422 3% $99.0 2% 1 bps $411 $97.4 0.68% 0.67% 3Q15 4Q15 3Q15 4Q15 3Q15 4Q15 Adjusted net income(1) Period‐end deposits Adjusted return on
Slide 32: Full year results
Full year results Adjusted pre‐provision profit (1) Period‐end loans(2) Adjusted return on average $s in millions $s in billions tangible ibl assets(1) 10% $99.0 6% 3 bps $1,615 $93.4 0.68% $1,468 0.65% 2014 2015 2014 2015 2014 2015 Adjusted net income(1) Period‐end deposits Adjusted return on
Slide 33: Consumer Banking segment
Consumer Banking segment 4Q15 change from Highlights $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 Linked q quarter: $ % $ % Net interest income $ 565 $ 556 $ 536 $ 9 2 % $ 29 5 % Net income down $1 million, or 1% Noninterest income 226 235 218 (9) (4) 8 4 Net interest income up $9 million, driven by
Slide 34: Commercial Banking segment
Commercial Banking segment 4Q15 change from Highlights $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 Linked q quarter: $ % $ % Net interest income $ 301 $ 299 $ 283 $ 2 1 % $ 18 6 % Commercial Banking net income increased $7 million Noninterest income 107 100 111 7 7 (4) (4) Total revenue increased $9
Slide 35: Other
Other 4Q15 change from Highlights $s in millions 4Q15 3Q15 4Q14 3Q15 4Q14 Linked q quarter: $ % $ % Other recorded net income was $2 million for 4Q15, down Net interest income $ 4 $ 1 $ 21 $ 3 300 % $ (17) (81) % $5 million as higher revenue and lower taxes were more Noninterest income 29 18 10 11
Slide 36: Loan Reconciliation
Loan Reconciliation Average balances $s in millions 4Q15 change from 4Q14 1Q15 2Q15 3Q15 4Q15 3Q15 4Q14 Consumer Banking Segment $ 49,351 $ 50,260 $ 51,024 $ 51,886 $ 52,737 $ 851 2 % $ 3,386 7 % Add: Non‐core loans 2,801 2,667 2,517 2,358 2,196 (162) (7) (605) (22) (1) Retail loans in Commercial Ba
Slide 37: Non-core home equity portfolio serviced by others
Non‐core home equity portfolio serviced by others (SBO)(1) Non‐core period‐end loans $3.0B $2.9B $2.7B $2.5B SBO balances by LTV SBO balances by FICO(2) $2.3B 120+ 100‐119 < 620 2 760+ 10% 15% 29% < 70 30% 4Q14 1Q15 2Q15 3Q15 4Q15 90‐99 15% Retail Commercial SBO 18% 620‐679 SBO balances and charge‐o
Slide 38: Appendix 2 – 2016 Outlook
Appendix 2 — 2016 Outlook %£ Citizens Financial Group, Inc.” 37
Slide 39: FY2016 outlook compared with 2015
FY2016 outlook compared with 2015 Adjusted 2015 vs. Adjusted 2014 FY2016 expectations vs. Adjusted 2015(2) excluding Chicago Divestiture impact 6% average earning asset growth 5‐6% average earning asset growth Balance sheet 8% average loan growth 6‐8% average loan growth growth 10% average
Slide 40: Strong growth in net interest income
Strong growth in net interest income Net interest income growth 2014‐2015 6.1% 1.5% (1.2)% (1.9)% (1.5)% $3 301 $3,301 $3 402 $3,402 2014 Earning asset Pay‐fixed swap Loan mix/ Deposit Term & sub‐ 2015 growth benefit yields costs (1) debt issuance and d other th NIM% 2.83% 0 bps +4 bps ‐3 bps ‐5 bps
Slide 41: Noninterest expense remains well-controlled
Noninterest expense remains well‐controlled $s in millions Adjusted noninterest expense(1) trend 2014‐2015 0.6% (3.0)% 0.8% 1.4% 1.1% (1.3)% $3,223 $3,209 3.9% (1) (1) Adjusted 2014 Strategic initiatives Other salaries & Equipment Outside services, Efficiency Chicago Adjusted 2015 salaries & benefit
Slide 42: Estimated impact of 2016 prospective Card Reward Accounting Change
Estimated impact of 2016 prospective Card Reward Accounting Change The following reflects 2016 growth‐rate growth rate expectations pre and post the estimated impact of a 2016 prospective Card Reward Accounting Change*, which would have the effect of reducing both Card fees and Other operating expen
Slide 43: Appendix 3 – Non-GAAP reconciliation
Appendix 3 – Non‐GAAP reconciliation 42
Slide 44: Non-GAAP Financial Measures
Non‐GAAP Financial Measures This document contains non‐GAAP financial measures. The table below presents reconciliations of certain non‐GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are usually included, where applicable, in the financial results pres
Slide 45: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE YEAR ENDED QUARTERLY TRENDS DECEMBER 31, 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Noninterest income, excluding special items: Noninterest income (GAAP) A $362 $353 $360 $347 $33
Slide 46: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE YEAR ENDED QUARTERLY TRENDS DECEMBER 31, 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Efficiency ratio and efficiency ratio, excluding restructuring charges and special items: Net in
Slide 47: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding restructuring charges and special items) $s in millions, except per share data FOR THE YEAR ENDED QUARTERLY TRENDS DECEMBER 31, 4Q15 3Q15 2Q15 1Q15 4Q14 2015 2014 Outside services, excluding restructuring charges and special items: Outside services (GAAP) X $
Slide 48: Non-GAAP Reconciliation Table
Non‐GAAP Reconciliation Table (Excluding Chicago Divestiture) $s in millions, 2015 Change from FOR THE YEAR ENDED DECEMBER 31, 2014 2015 2014 2013 2011 $ % Adjusted net interest income, excluding Chicago adjustment: N t iinterest Net t t iincome (GAAP) RR $3,402 $3 402 $3,301 $3 301 ($101) (3)% Less
Slide 49: 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) BBB $122,950 $116,187 Less: Estimated ‐ Chicago adjustment
Slide 50: Non-GAAP Reconciliation - Segments
Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions T H R E E M O N T H S E N D E D D E C E M B E R 31, T H R E E M O N T H S E N D E D S E P T E M B E R 30 , T H R E E M O N T H S E N D E D JUN E 3 0, 20 15 2 015 2 0 15 C o ns um e r C o m m e rc ia l C o nsum er C o m m
Slide 51: Non-GAAP Reconciliation - Segments
Non‐GAAP Reconciliation Table Non-GAAP Reconciliation - Segments $s in millions FOR THE YEAR ENDED DECEMBER 31, 2015 2014 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated N e t inc o m e a v a ila ble t o c o m m o n s t o c k ho lde rs :
Slide 52: Citizens Financial Group, Inc.
3« Citizens Financial Group, Inc.”
Citizens Financial Group — FY2015 Earnings Presentation on 6ix