Citizens Financial Group, Inc. · NYSE:CFG
Citizens Financial — Q3 2016 Earnings Presentation
34 slides from Citizens Financial's earnings presentation, Oct 21, 2016
Slide 1: 3Q16 Financial Results
3Q16 Financial Results October 21, 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: 3Q16 highlights
3Q16 highlights Diluted EPS of $0.56 up 40% from 3Q15; Adjusted diluted EPS(1) of $0.52 up 30% from $0.40 in 3Q15 Improving Revenue of $1.4 billion, up 14% YoY and 8% QoQ; Adjusted revenue(1) up 9% YoY and 3% QoQ profitability and Positive operating leverage YoY of 4.5% - Adjusted basis; effic
Slide 4: 3Q16 notable items
3Q16 notable items $s in millions, except per share data GAAP results include TDR Transaction gain partially offset by other costs associated with Asset Finance repositioning, TOP III efficiency initiatives and operational items. 3Q16 notable items Pre-tax After-tax EPS impact Gain on mortgage/home
Slide 5: GAAP financial summary
GAAP financial summary 3Q16 change from Highlights $s in millions 3Q16 2Q16 3Q15 2Q16 3Q15 YoY excluding $ % $ % 3Q16 notable Linked quarter: Net interest income $ 945 $ 923 $ 856 $ 22 2 % $ 89 10 % items(1) Net income and diluted EPS both up 22%, including the impact of Noninterest income 435 355
Slide 6: Adjusted financial summary
Adjusted financial summary(1) Highlights Adjusted 3Q16(1) change from 3Q16 Notable 3Q16 Reported Reported Linked quarter: $s in millions Reported Items Adjusted(1) 2Q16 3Q15 Adjusted net income(1) increased $35 million, or 14% Net interest income $ 945 $ - $ 945 2 % 10 % ─ Adjusted diluted EPS inc
Slide 7: Net interest income
Net interest income $s in millions, except earning Net interest income Highlights assets $129B $132B Linked quarter: $123B $124B $126B NII up $22 million, or 2% ─ Reflects 1% average loan growth driven by commercial, mortgage and student loans NIM of 2.84% remained stable with second quarter 201
Slide 8: Net interest margin
Net interest margin NIM walk 2Q16 to 3Q16 0.03% (0.01)% (0.02)% 0.00% 2.84% 2.84% 2Q16 NIM% Loan Investment Deposit Borrowing 3Q16 NIM% yields portfolio costs costs/other yield NIM walk 3Q15 to 3Q16 0.16% (0.05)% (0.01)% (0.02)% 2.84% 2.76% 3Q15 NIM% Loan Investment Deposit Borrowing 3Q16 NIM% yield
Slide 9: Noninterest income
Noninterest income $s in millions 3Q16 change from Highlights 3Q16 2Q16 3Q15 2Q16 3Q15 Linked quarter: $ % $ % Noninterest income increased $80 million, or 23%, driven by the Service charges and fees $ 152 $ 150 $ 145 $ 2 1 % $ 7 5 % $72 million TDR gain recorded in other income Card fees 52 51 60
Slide 10: Noninterest expense
Noninterest expense $s in millions Highlights 3Q16 change from 3Q16 2Q16 3Q15 2Q16 3Q15 Linked quarter: $ % $ % Noninterest expense increased $40 million, or 5%, including $36 Salaries and benefits $ 432 $ 432 $ 404 $ — — % $ 28 7 % million of notable items ─ Adjusted noninterest expense(1) increa
Slide 11: 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 12: Consumer Banking average loans and leases
Consumer Banking average loans and leases $s in billions Average loans and leases Highlights $54.0B $55.0B Linked quarter: $52.5B $53.5B $51.6B $2.6 Average loans increased $916 million, or 2%, largely $2.5 $2.5 $2.6 $2.9 reflecting growth in higher yielding student and mortgage $2.4 $3.0 $2.9 $3.
Slide 13: Commercial Banking average loans and leases
Commercial Banking average loans and leases $s in billions Average loans and leases Highlights $45.9B $46.5B Linked quarter: $43.8B $41.8B $42.5B $3.5 $3.3 Average loans up $618 million, or 1%, with growth in Mid- $3.2 corporate and Industry Verticals, Commercial Real Estate and $3.0 $3.0 Franchis
Slide 14: Average funding and cost of funds
Average funding and cost of funds $s in billions Average interest-bearing liabilities and DDA Highlights $119.0B $121.0B $114.0B $115.9B Linked quarter: $113.0B $10.3 $10.9 Total average deposits up $2.7 billion $4.1 $6.0 $9.9 $2.6 $5.1 $3.7 $0.9 ─ Largely growth in Commercial money market and $5.
Slide 15: Strong credit-quality trends continue
Strong credit-quality trends continue $s in millions Highlights Net charge-offs (recoveries) Overall credit quality remained broadly stable despite growth in commercial charge- $83 $83 $77 offs and NPLs largely tied to energy and commodity-based credits $75 $7 $5 Net charge-offs of $83 million,
Slide 16: Capital and liquidity remain strong
Capital and liquidity remain strong as of Highlights $s in billions (period-end) 3Q15 4Q15 1Q16 2Q16 3Q16 Capital levels remain above regional peers (1,2) Basel III transitional basis Common equity tier 1 capital $ 13.2 $ 13.4 $ 13.6 $ 13.8 $ 13.8 3Q16 Basel III common equity tier 1 ratio (trans
Slide 17: 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 services charges up 3%. Reenergize household growth Continued expansion of Citizens Check-up to help deliver needs-based solutions to
Slide 18: 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 $95-$100 million annual pre-tax benefit by end of 2016 benefit of $9
Slide 19: 4Q16 outlook
4Q16 outlook(1) 4Q16 expectations vs. 3Q16 Adjusted(1) Net interest income, ~1.5-2.0% loan growth net interest margin Net interest margin relatively stable Noninterest Relatively stable income Modest increase Noninterest expense Committed to YoY operating leverage goals Broad credit tren
Slide 20: Key messages
Key messages Citizens once again delivered strong results in 3Q16 ─ Financial results continue to improve and meet expectations. Strong EPS growth, robust operating leverage, improving efficiency ratio, active capital management ─ Adjusted ROTCE of 8% up from 4.3% three years ago in 3Q13. 3.7% imp
Slide 21: Appendix
Appendix 3% Citizens Financial Group, Inc.” 21
Slide 22: Linked-quarter results
Linked-quarter results Pre-provision profit Period-end loans (2) Asset return metrics $s in millions $s in billions $513 14% 2% 0.82% 0.80% 13 bps $482 $103.6 $105.5 $451 $451 0.69% 0.72% 8 bps 7% 2Q16 3Q16 2Q16 3Q16 2Q16 3Q16 GAAP results Return on average total assets Adjusted results(1)
Slide 23: Quarter-over-quarter results
Quarter-over-quarter results Pre-provision profit Period-end loans (2) Asset return metrics $s in millions $s in billions $513 25% 0.82% 0.80% 17 bps $482 $105.5 8% $97.4 0.65% 0.68% 12 bps $411 $411 17% 3Q15 3Q16 3Q15 3Q16 3Q15 3Q16 GAAP results Return on average total assets Adjusted res
Slide 24: Consumer Banking segment
Consumer Banking segment 3Q16 change from Highlights $s in millions 3Q16 2Q16 3Q15 2Q16 3Q15 Linked quarter: $ % $ % Net income up $2 million, or 2% Net interest income $ 621 $ 602 $ 556 $ 19 3 % $ 65 12 % Net interest income up $19 million, or 3%, led by higher Noninterest income 229 219 235 10
Slide 25: Commercial Banking segment
Commercial Banking segment 3Q16 change from Highlights $s in millions 3Q16 2Q16 3Q15 2Q16 3Q15 Linked quarter: $ % $ % Commercial Banking net income remained relatively stable Net interest income $ 327 $ 314 $ 299 $ 13 4 % $ 28 9 % Total revenue increased 3% with solid improvement in net interes
Slide 26: Other
Other 3Q16 change from Highlights $s in millions 3Q16 2Q16 3Q15 2Q16 3Q15 Linked quarter: $ % $ % Other recorded net income of $43 million compared to a net loss Net interest income $ (3) $ 7 $ 1 $ (10) (143) % $ (4) NM % of $11 million. The increase was largely driven by the net impact Noninteres
Slide 27: 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 28: 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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q16 Change 2016 Change 3Q16 2Q16 1Q16 4Q15 3Q15 2Q16 3Q15
Slide 29: 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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q16 Change 2016 Change 3Q16 2Q16 1Q16 4Q15 3Q15 2Q16 3Q15
Slide 30: 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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q16 Change 2016 Change 3Q16 2Q16 1Q16 4Q15 3Q15 2Q16 3Q15
Slide 31: 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 FOR THE NINE MONTHS ENDED SEPT 30, 3Q16 Change 2016 Change 3Q16 2Q16 1Q16 4Q15 3Q15 2Q16 3Q15
Slide 32: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions THREE MONTHS ENDED SEPT 30, THREE MONTHS ENDED JUNE 30, THREE MONTHS ENDED MAR 31, 2016 2016 2016 Consumer Commercial Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Oth
Slide 33: Key performance metrics, Non-GAAP Financial Measures and reconciliations
Key performance metrics, Non-GAAP Financial Measures and reconciliations $s in millions FOR THE NINE MONTHS ENDED SEPT 30, 2016 2015 Consumer Commercial Consumer Commercial Banking Banking Other Consolidated Banking Banking Other Consolidated Net income available to common stockholders: Net income (
Slide 34: Citizens Financial Group, Inc.
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Citizens Financial Group — Q3 2016 Earnings Presentation on 6ix