Results include a $19 million after-tax
benefit, or $0.04 per diluted share, from notable items
Adjusted net income up 26% and Adjusted diluted
EPS up 30% from third quarter 2015*
ROTCE of 8.6% and Adjusted ROTCE of 8.0% in
third quarter 2016*
Positive operating leverage year over year of
5.5% and 4.5% on an Adjusted basis*
Citizens Financial Group, Inc. (NYSE: CFG or “Citizens”) today
reported third quarter net income of $297 million, or $0.56 per
diluted common share, up 35% and 40%, respectively, from $220
million and $0.40 per diluted common share in third quarter 2015.
Compared with second quarter 2016, net income increased 22% from
$243 million and earnings per diluted common share increased 22%
from $0.46. Third quarter 2016 results include a $19 million
after-tax benefit from notable items, reflecting a gain on the sale
of a Troubled Debt Restructuring portfolio (“TDR Transaction”)
partially offset by other items largely associated with our
efficiency and balance sheet optimization initiatives.
3Q16 notable items(1)
After
tax
EPS impact Gain on mortgage/home equity TDR
Transaction $ 45 $ 0.09 Home equity operational items
(5 ) (0.01 ) TDR gain after impact of home
equity operational items $ 40 $ 0.08 Asset Finance
repositioning (10 ) (0.02 ) Top III efficiency initiatives (11 )
(0.02 ) Total 3Q16
notable items $ 19 $ 0.04
1) See pg. 7 for additional detail.
Excluding notable items, third quarter 2016 Adjusted net income
totaled $278 million, or $0.52 per diluted common share. Adjusted
EPS was up 13% from second quarter 2016 and 30% from third quarter
2015. Third quarter 2016 Return on Average Common Equity (“ROTCE”)
of 8.6% and Adjusted ROTCE of 8.0% improved from 7.3% in second
quarter 2016 and 6.6% in third quarter 2015.*
“We are pleased to report another very strong quarter of
improved financial performance with good revenue growth, robust
positive operating leverage and further progress across all of our
key strategic initiatives,” said Chairman and CEO Bruce Van Saun.
“Our team continues their great work towards running the bank
better and delivering for all of our stakeholders, including
customers, colleagues, communities and shareholders.”
Van Saun continued, “I’m also pleased to announce that as part
of our 2016 capital plan we launched our first open-market
share-repurchase program since becoming a fully independent
company. During the quarter we repurchased 11 million shares of
common stock, returning $313 million to shareholders including
common dividends. We remain focused on continuing to enhance
shareholder returns.”
CFG’s Board of Directors declared a quarterly common stock
dividend of $0.12 per common share payable on November 16, 2016 to
shareholders of record at the close of business on November 2,
2016. Third quarter 2016 net income available to common
stockholders was reduced by $7 million, or $0.01 per share, related
to preferred stock dividends, which are paid semi-annually and were
not declared in second quarter 2016.
Third Quarter 2016 vs. Second Quarter
2016
Key Highlights
- Third quarter highlights include net
income to common stockholders growth of 19%, driven by 8% revenue
growth with 2% net interest income growth, 23% noninterest income
growth, and 5% noninterest expense growth. These GAAP results
reflect the impact of the TDR Transaction gain and other third
quarter notable items. Results reflect positive operating leverage
of 3%, a 2% improvement in the efficiency ratio and ROTCE of
8.6%.*
- Adjusted results reflect 12% growth in
net income available to common stockholders with 3% revenue growth
highlighted by continued loan and deposit growth, a stable net
interest margin, 4% noninterest income growth and a modest increase
in noninterest expense. Adjusted results also reflect positive
operating leverage of 2% and the repurchase of $250 million of
common shares, which led to a 72 basis point improvement in
Adjusted ROTCE to 8.0%.*
- Tangible book value per common share
increased to $26.20 and common shares outstanding decreased by 11
million, or 2%.
Results
- Total revenue of $1.4 billion was up
$102 million, or 8%, driven by the impact of the TDR Transaction.
Adjusted total revenue of $1.3 billion was up $35 million, or 3%,
on 2% net interest income growth and 4% noninterest income growth.*
- Net interest income of $945 million was
up $22 million, driven by 1% average loan growth and the benefit of
an additional day during the quarter.
- Net interest margin of 2.84% remained
stable, as the benefit of improved loan yields was offset by lower
investment portfolio yields and an increase in deposit costs.
- Noninterest income of $435 million
increased $80 million, or 23%, reflecting the impact of notable
items in other noninterest income. Adjusted noninterest income* of
$368 million increased $13 million, or 4%, reflecting particular
strength in mortgage banking fees, service charges and fees, other
income and foreign exchange and letter of credit fees, partially
offset by lower securities gains. Capital markets fees were
relatively flat compared to record second quarter levels.
- Noninterest expense of $867 million
increased $40 million, or 5%, driven by the impact of notable
items, largely in salaries and employee benefits, outside services
and other expense. Adjusted noninterest expense* of $831 million
increased $4 million, reflecting a reduction in salaries and
employee benefits from higher second quarter 2016 levels, which was
more than offset by an increase in outside services largely related
to professional services and marketing expense, higher FDIC
insurance expense and small increases across other expense
categories.
- Efficiency ratio of 63%; Adjusted
efficiency ratio* of 63% improved 140 basis points.
- Provision for credit losses of $86
million decreased $4 million, as the impact of a $17 million
increase in commercial net charge-offs, driven largely by
previously reserved for losses in the energy portfolio, was more
than offset by continued improvement in underlying credit
quality.
Balance Sheet
- Average interest-earning assets
increased $2.2 billion, or 2%, driven by continued loan growth.
Period-end loans increased 2%.
- Average deposits increased $2.7
billion, or 3%, driven by growth in money market and checking with
interest deposits with particular strength in the Commercial
business. Period-end deposits increased 2%.
- Nonperforming loans and leases (“NPLs”)
to total loans and leases ratio of 1.05% increased slightly from
1.01%, largely reflecting energy- and commodity-related increases
in commercial NPLs. The balance of the portfolio broadly reflects
stable to improving trends. Allowance coverage of NPLs was 112%
compared with 119%.
- Net charge-offs of 32 basis points
increased seven basis points from relatively low second quarter
levels, driven by higher charge-offs in the commercial energy
portfolio.
- Capital strength remained robust with a
common equity tier 1 (“CET1”) risk-based capital ratio of
11.3%.
- Repurchased 11.1 million shares of
common stock, returning $250 million to shareholders.
Third Quarter 2016 vs. Third Quarter
2015
Key Highlights
- Third quarter highlights include net
income to common stockholders growth of 36%, given strong revenue
growth led by a 23% increase in noninterest income and a 9%
increase in noninterest expense driven by notable items. Results
reflect positive operating leverage of 5.5%, a 3% improvement in
the efficiency ratio and ROTCE of 8.6% compared to 6.6% in third
quarter 2015.*
- Adjusted results reflect net income to
common stockholders growth of 27%, highlighted by revenue growth of
9%, with strength in both net interest income and fee income and
continued noninterest expense discipline. Adjusted results reflect
positive operating leverage of 4.5% and almost 3% improvement in
the efficiency ratio. Adjusted ROTCE of 8.0% compares with 6.6% in
third quarter 2015.*
Results
- Total revenue of $1.4 billion increased
$171 million, or 14%, reflecting net interest income growth and the
impact of notable items. Adjusted total revenue* increased 9%,
driven by strong loan growth and net interest margin improvement as
well as growth in mortgage banking, capital markets and service
charges and fees.
- Net interest income increased $89
million, or 10%, reflecting the benefit of loan growth and an eight
basis point improvement in the net interest margin.
- Net interest margin of 2.84% reflects
the benefits of improved loan yields given continued pricing and
portfolio optimization initiatives, as well as higher short-term
rates. These benefits were partially offset by a reduction in
investment portfolio yields, which includes a reduction in Federal
Reserve Bank stock dividends, as well as increased borrowing
costs.
- Noninterest income of $435 million
increased $82 million driven by the $72 million TDR Transaction
gain. Adjusted noninterest income* of $368 million increased $15
million from third quarter 2015 levels. Strength in mortgage
banking fees, capital markets fees and service charges and fees was
partially offset by the card reward accounting change impact, lower
trust and investment services fees and other income.
- Noninterest expense of $867 million
increased $69 million, driven by the effect of third quarter
notable items largely in salaries and employee benefits, outside
services and other expense. Adjusted noninterest expense* of $831
million increased $33 million, driven by a $17 million increase in
salaries and employee benefits, largely reflecting merit increases
and higher incentive payments.
- Provision for credit losses of $86
million increased $10 million, largely reflecting an $8 million
increase in net charge-offs.
- ROTCE of 8.6%; Adjusted ROTCE of 8.0%
improved 142 basis points.*
Balance Sheet
- Average interest-earning assets
increased $8.7 billion, or 7%, driven by strong loan growth.
- Average deposits increased $5.7
billion, or 6%, on strength in checking with interest, money market
and DDA products.
- NPLs to total loans and leases ratio of
1.05% remained stable, as underlying improvement in retail
nonperforming loans as well as the impact of the TDR Transaction
more than offset an increase in commercial nonperforming loans,
largely commodities-related borrowers. Allowance coverage of NPLs
of 112% compares with 116%.
- Net charge-offs of 32 basis points of
loans remained relatively stable with third quarter 2015 levels as
an increase in commercial was largely offset by continued
improvement in retail.
Update on Plan Execution
- Continued progress on initiatives to
drive growth and enhance efficiency.
- Consumer Banking – Performance paced by
solid deposit and loan growth, improvement in conforming mortgage
volume and strong salesforce expansion, with a record 47 net
mortgage loan officer hires during the quarter as well as 11
financial consultants, resulting in nearly 500 mortgage originators
and 350 financial consultants at quarter end. Our needs-based
approach for serving retail customers, Citizens Checkup, has
resulted in approximately 275,000 scheduled appointments year to
date with high levels of customer satisfaction.
- Commercial Banking — Delivered strong
results in Capital Markets, foreign exchange and interest rate
products. Generated 11% average loan growth from the year-ago
quarter, reflecting continued progress in Mid-corporate and
Industry Verticals, Commercial Real Estate and Franchise Finance.
Treasury Solutions fee income up 10% from third quarter 2015.
- Continue to deliver on efficiency and
balance sheet optimization strategies.
- Tapping Our Potential (“TOP”)
initiatives remain on track; TOP II is delivering $95 million to
$100 million of pre-tax benefits in 2016, while TOP III continues
to project pre-tax revenue and expense benefits of $73 million to
$90 million and $10 million to $15 million of tax benefits by the
end of 2017.
- Initiatives to shift loan portfolio mix
to higher-return categories continue to progress well; extracting
capital from TDR and aircraft lease portfolios; managing deposit
pricing to minimize cost while achieving growth objectives.
*Please see important information on Key Performance Metrics and
Non-GAAP Financial Measures at the end of this release for an
explanation of our use of these metrics and non-GAAP financial
measures and their reconciliation to GAAP financial measures.
“Adjusted” results exclude restructuring charges, special items and
notable items, as applicable. Where there is a reference to an
“Adjusted” result in a paragraph, all measures that follow that
“Adjusted” result are also “Adjusted” when applicable.
Earnings highlights
3Q16 change from ($s in millions, except per share data)
3Q16 2Q16
3Q15 2Q16 3Q15 Earnings
$ % $ % Net interest income $ 945 $ 923
$ 856 $ 22 2 % $ 89 10 % Noninterest income 435 355 353 80 23 82 23
Total revenue 1,380 1,278 1,209 102 8 171 14 Noninterest expense
867 827 798 40 5 69 9 Pre-provision profit 513 451 411 62 14 102 25
Provision for credit losses 86
90 76 (4 ) (4 )
10 13 Net income 297 243 220 54 22 77 35 Preferred
dividends 7 — 7 7 100 — — Net income available to common
stockholders 290 243 213 47 19 77 36 After-tax restructuring
charges, special items and notable Items 19
— —
19 100 19 100 Adjusted net income available to
common stockholders* $ 271 $ 243
$ 213 $ 28 12 % $ 58 27 %
Average common shares outstanding Basic (in millions) 519.5
529.0 531.0 (9.5 ) (2 ) % (11.5 ) (2 ) % Diluted (in millions)
521.1 530.4 533.4 (9.2 ) (2 ) % (12.3 ) (2 ) % Diluted earnings per
share $ 0.56 $ 0.46 $ 0.40 $ 0.10 22 % $ 0.16 40 % Adjusted diluted
earnings per share* $ 0.52 $
0.46 $ 0.40 $ 0.06 13 % $ 0.12
30 %
Key performance metrics* Net interest margin 2.84 %
2.84 % 2.76 % — bps 8 bps Effective income tax rate 30.5 32.6 34.1
(215 ) bps (366 ) bps Efficiency ratio 63 65 66 (183 ) bps (314 )
bps Adjusted efficiency ratio* 63 65 66 (140 ) bps (271 ) bps
Return on average common equity 5.8 4.9 4.4 88 bps 142 bps Return
on average tangible common equity 8.6 7.3 6.6 128 bps 198 bps
Adjusted return on average tangible common equity* 8.0 7.3 6.6 72
bps 142 bps Return on average total assets 0.8 0.7 0.7 13 bps 17
bps Return on average total tangible assets
0.9 % 0.7 % 0.7 % 14 bps
18 bps
Capital adequacy(1,2) Common equity tier 1 capital
ratio 11.3 % 11.5 % 11.8 % Total capital ratio 14.2 14.9 15.4 Tier
1 leverage ratio 10.1 %
10.3 % 10.4 %
Asset quality(2)
Total nonperforming loans and leases as a % of total loans and
leases 1.05 % 1.01 % 1.06 % 4 bps (1 ) bps Allowance for loan and
lease losses as a % of loans and leases 1.18 1.20 1.23 (2 ) bps (5
) bps Allowance for loan and lease losses as a % of nonperforming
loans and leases 112 119 116 (724 ) bps (409 ) bps Net charge-offs
as a % of average loans and leases 0.32 %
0.25 % 0.31 % 7 bps 1 bps
1) Current reporting-period regulatory
capital ratios are preliminary. Basel III ratios assume that
certain definitions impacting qualifying Basel III capital will
phase in through 2019.
2) Capital adequacy and asset-quality
ratios calculated on a period-end basis, except net
charge-offs.
Discussion of Results:
Third quarter 2016 results benefited from $31 million pre-tax,
or $19 million after-tax, of notable items detailed in the table
below.
3Q16 notable items Pre tax After
tax EPS impact Gain on mortgage/home equity TDR
Transaction $ 72 $ 45 $ 0.09 Home equity operational items
(8 ) (5 ) (0.01 ) TDR gain after impact
of home equity operational items $ 64 $ 40 $ 0.08 Asset
Finance repositioning(1) (16 ) (10 ) (0.02 ) TOP III efficiency
initiatives(2) (17 ) (11 ) (0.02 )
Total 3Q16 notable items $ 31 $
19 $ 0.04
1) Pre-tax reflects $(5) million
noninterest income impact and $11 million of other expense related
to lease-residual impairment tied to legacy RBS aircraft leasing
borrowers moved to runoff in non-core.
2) Pre-tax expense reflects $11 million in
salaries and benefits and $6 million in outside services associated
with TOP III efficiency initiatives.
During third quarter 2016, we completed the previously announced
TDR Transaction sale of $310 million of consumer real
estate-secured loans classified as troubled debt restructurings
that resulted in a pre-tax gain of approximately $72 million, which
was partially offset by $8 million of home equity systems and
operational items identified as part of a broader review in
conjunction with the transaction. Additionally, the company
utilized approximately $33 million of the gain to fund costs
associated with efficiency and balance sheet optimization
initiatives.
Third quarter 2016 net income of $297 million was up $54
million, or 22%, from second quarter 2016 as the benefit of 8%
revenue growth and a decrease in provision for credit losses
exceeded noninterest expense growth of 5%. Third quarter 2016
diluted EPS of $0.56 grew 22% from second quarter 2016, reflecting
net income growth and the benefit of a 9.2 million reduction in
average fully diluted shares outstanding, partially offset by the
impact of a $7 million, or $0.01 per diluted common share,
preferred dividend in third quarter 2016.
Compared with third quarter 2015 levels, net income improved $77
million as revenue growth of $171 million was partially offset by a
$69 million increase in noninterest expense and a $10 million
increase in provision for credit losses. Third quarter 2016 diluted
EPS growth increased 40% year over year and included the benefit of
a 12.3 million reduction in average fully diluted shares
outstanding.
Adjusted results* 3Q16
Notable 3Q16 Adjusted 3Q16* change from ($s in
millions, except per share data)
Reported Items
Adjusted* Reported
Reported 2Q16 3Q15 Net interest income
$
945
$
-
$
945
2 % 10 % Noninterest income 435 (67 ) 368 4 4 Total revenue 1,380
(67 ) 1,313
3 9 Noninterest expense 867 (36 ) 831 — 4 Net income available to
common stockholders
$
290
$
(19
)
$
271
12 % 27 %
Key performance metrics*
ROTCE 8.6 % (56 )
bps 8.0 % 72 bps 142 bps Efficiency ratio 62.9 % 43 bps 63.3 % (140
) bps (271 ) bps Diluted EPS
$
0.56
$
(0.04
)
$
0.52
13 % 30 %
Excluding the impact of notable items, Adjusted third quarter
2016 net income increased $35 million from second quarter 2016 as a
$35 million increase in Adjusted total revenue and a $4 million
decrease in provision for credit losses were partially offset by a
$4 million increase in noninterest expense. Adjusted third quarter
2016 diluted earnings per share of $0.52 were up 13% from second
quarter 2016, reflecting a 12% increase in net income available to
common stockholders and a 2% reduction in fully diluted shares
outstanding.*
Compared with third quarter 2015, Adjusted net income increased
$58 million, or 26%. Adjusted results reflect a $104 million
increase in total revenue driven by net interest income, partially
offset by a $33 million increase in noninterest expense. Adjusted
third quarter 2016 diluted earnings per share of $0.52 were up 30%
from third quarter 2015, reflecting a 27% increase in net income
available to common stockholders and a 2% reduction in fully
diluted shares outstanding.*
Net interest income 3Q16 change
from ($s in millions)
3Q16
2Q16 3Q15 2Q16 3Q15
$ % $ %
Interest income: Interest and fees on loans and leases and
loans held for sale $ 931 $ 903 $ 818 $ 28 3 % $ 113 14 %
Investment securities 146 141 154 5 4 (8 ) (5 ) Interest-bearing
deposits in banks 2 2
2 — — — — Total
interest income $ 1,079 $ 1,046
$ 974 $ 33 3 % $ 105 11 %
Interest
expense: Deposits $ 71 $ 63 $ 65 $ 8 13 % $ 6 9 % Federal funds
purchased and securities sold under agreements to repurchase 1 — 4
1 100 (3 ) (75 ) Other short-term borrowed funds 10 12 17 (2 ) (17
) (7 ) (41 ) Long-term borrowed funds 52
48 32 4 8
20 63 Total interest expense $ 134
$ 123 $ 118 $ 11 9 % $ 16
14 % Net interest income $ 945 $ 923
$ 856 $ 22 2 % $ 89 10 % Net interest
margin 2.84 % 2.84 % 2.76 %
— bps 8 bps
Net interest income of $945 million increased $22 million from
second quarter 2016, reflecting a 1% increase in average loans,
stable net interest margin and one additional day in the quarter.
Net interest margin of 2.84% reflects the benefit of improved
commercial and consumer loan yields, including the benefit of an
increase in LIBOR, offset by an increase in deposit costs and a
reduction in investment portfolio yields.
Compared to third quarter 2015, net interest income increased
$89 million, or 10%, largely reflecting 7% average loan growth and
an eight basis point improvement in net interest margin. Results
were driven by improved loan yields given continued pricing and
portfolio optimization initiatives and higher short-term interest
rates, partially offset by a reduction in investment portfolio
yield driven by lower long-term rates and a decrease in Federal
Reserve Bank stock dividends, as well as increased borrowing costs
related to senior bank-debt issuance.
Noninterest Income
3Q16 change from ($s in millions)
3Q16
2Q16 3Q15
2Q16 3Q15 $ % $
% Service charges and fees $ 152 $ 150 $ 145 $
2 1 % $ 7 5 % Card fees 52 51 60 1 2 (8 ) (13 ) Trust and
investment services fees 37 38 41 (1 ) (3 ) (4 ) (10 ) Mortgage
banking fees 33 25 18 8 32 15 83 Capital markets fees 34 35 21 (1 )
(3 ) 13 62 Foreign exchange and letter of credit fees 23 21 22 2 10
1 5 Securities gains, net — 4 2 (4 ) (100 ) (2 ) (100 ) Other
income(1) 104 31
44 73 235 60 136
Noninterest income $ 435 $ 355
$ 353 $ 80 23 % $ 82 23 %
1) Other income includes bank-owned life
insurance and other income.
Noninterest income of $435 million increased $80 million from
second quarter 2016, driven by the $72 million TDR Transaction gain
recorded in other income. Adjusted noninterest income* of $368
million increased $13 million, or 4%, from second quarter 2016,
largely reflecting higher mortgage banking fees, other income and
service charges and fees. Mortgage banking fees increased $8
million, reflecting the benefit of higher application and
origination volumes with improved secondary mix, and increased loan
sales and spreads, partially offset by a modest decrease in
mortgage servicing rights (“MSR”) valuations. Adjusted other
income* increased $6 million from second quarter levels, which
included an other-than-temporary impairment charge of $6 million on
the securities portfolio tied to a new model implementation.
Service charges and fees increased $2 million, reflecting improved
volume and an additional day in the quarter. Capital markets fees
of $34 million were in line with record second quarter levels and
reflected continued strong loan syndication fees. Results also
reflect modest growth in foreign exchange and letter of credit fees
as well as relatively stable card fees and trust and investment
services fees. There were no securities gains in third quarter
2016, compared with $4 million in second quarter 2016.
Noninterest income increased $82 million from third quarter 2015
levels, driven by the $72 million TDR Transaction gain recorded in
other income. Adjusted noninterest income* of $368 million
increased $15 million, or 4%, from third quarter 2015 levels that
included a $16 million benefit from a branch sale gain and the card
reward accounting change impact. Mortgage banking fees increased
$15 million, driven by higher origination volumes and an increase
in loan sales and spreads. Capital markets fees increased $13
million, reflecting strong loan syndication volumes and the
broadening of our capabilities. Service charges and fees increased
$7 million, driven by improved pricing in retail and commercial
products as well as higher volume. Card fees decreased $8 million,
reflecting the impact of the card reward accounting change.
Adjusted other income* decreased $7 million from third quarter 2015
levels that included an $8 million branch real estate sale gain.
Trust and investment services fees decreased $4 million, reflecting
a change in the mix of product sales.
Noninterest expense 3Q16
change from ($s in millions)
3Q16
2Q16 3Q15 2Q16
3Q15 $ % $ % Salaries and
benefits $ 432 $ 432 $ 404 $ — — % $ 28 7 % Occupancy 78 76 75 2 3
3 4 Equipment expense 65 64 62 1 2 3 5 Outside services 102 86 89
16 19 13 15 Amortization of software 46 41 35 5 12 11 31 Other
expense 144 128
133 16 13 11 8 Reported
noninterest expense $ 867 $ 827
$ 798 $ 40 5 % $ 69 9 % Adjusted
salaries and benefits* $ 421 $ 432 $ 404 $ (11 ) (3 ) % $ 17 4 %
Occupancy 78 76 75 2 3 3 4 Equipment expense 65 64 62 1 2 3 5
Adjusted outside services* 94 86 89 8 9 5 6 Adjusted amortization
of software* 43 41 35 2 5 8 23 Adjusted other expense*
130 128 133
2 2 (3 ) (2 ) Adjusted noninterest expense*
$ 831 $ 827 $ 798 $ 4
— % $ 33 4 %
Noninterest expense of $867 million increased $40 million from
second quarter 2016 and $69 million from third quarter 2015 driven
by the impact of $36 million of notable items, largely in salaries
and employee benefits, outside services and other expense. Adjusted
noninterest expense* increased $4 million as an $11 million
decrease in salaries and employee benefits, from higher second
quarter levels, which included higher payroll taxes and benefits
related to incentive payments, was more than offset by increases in
other categories. These other categories include higher outside
services expense, reflecting higher technology outsourcing expense
and costs related to consumer loan product growth, increased
regulatory and FDIC insurance expense and higher amortization of
software and occupancy expense.
Compared with third quarter 2015, Adjusted noninterest expense*
of $831 million increased $33 million, driven by a $17 million
increase in Adjusted salaries and employee benefits, largely
reflecting merit increases and higher incentive expense given
strong revenue and income performance. Adjusted results also
reflect higher software amortization, outside services expense, and
equipment and occupancy expense, partially offset by the card
reward accounting change impact.
The effective tax rate improved to 30.5% compared to 32.6% in
second quarter 2016 and 34.1% in third quarter 2015, driven by
benefits from TOP III initiatives.
Consolidated balance sheet review(1)
3Q16 change from
($s in millions)
3Q16
2Q16 3Q15 2Q16
3Q15 $ % $
% Total assets $ 147,015 $ 145,183 $ 135,447 $ 1,832 1 % $
11,568 9 % Loans and leases and loans held for sale 105,993 104,401
97,851 1,592 2 8,142 8 Deposits 108,327 106,257 101,866 2,070 2
6,461 6 Average interest-earning assets (quarterly) 131,669 129,492
123,017 2,177 2 8,652 7 Stockholders' equity 20,181 20,226 19,600
(45 ) — 581 3 Stockholders' common equity 19,934 19,979 19,353 (45
) — 581 3 Tangible common equity $ 13,576 $ 13,608 $ 12,939 $ (32 )
— % $ 637 5 % Loan-to-deposit ratio (period-end)(2) 97.9 % 98.3 %
96.1 % (40 ) bps 179 bps Common equity tier 1 capital ratio(3) 11.3
11.5 11.8 Total capital ratio(3) 14.2 %
14.9 % 15.4 %
1) Represents period end unless otherwise
noted.
2) Includes loans held for sale.
3) Current reporting period regulatory
capital ratios are preliminary. Basel III ratios assume that
certain definitions impacting qualifying Basel III capital will
phase in through 2019.
Total assets of $147.0 billion increased $1.8 billion, or 1%,
from June 30, 2016, driven by continued loan growth, including a
$1.1 billion increase in retail loans and leases and an $832
million increase in commercial loans as well as a $620 million
increase in investment portfolio assets. Compared with September
30, 2015, total assets increased $11.6 billion, or 9%, primarily
reflecting an $8.0 billion increase in loans and leases with $5.1
billion in commercial and $2.9 billion in retail, as well as a $3.0
billion increase in investment portfolio assets.
Average interest-earning assets of $131.7 billion in third
quarter 2016 increased $2.2 billion, or 2%, from the prior quarter,
driven by a $1.1 billion increase in investment portfolio assets, a
$789 million increase in retail loans and a $570 million increase
in commercial loans and leases. Compared to third quarter 2015,
average interest-earning assets increased $8.7 billion, or 7%,
driven by commercial loan growth of $4.5 billion, retail loan
growth of $2.7 billion and a $1.3 billion increase in investment
portfolio assets, largely interest-bearing cash.
Interest-earning assets
3Q16 change from ($s in millions)
3Q16
2Q16 3Q15 2Q16
3Q15 Period-end interest-earning assets $
% $ % Investments and interest-bearing
deposits $ 28,424 $ 27,804 $ 25,406 $ 620 2 % $ 3,018 12 %
Commercial loans and leases 50,389 49,557 45,269 832 2 5,120 11
Retail loans 55,078 53,994 52,162 1,084 2 2,916 6 Total loans and
leases 105,467 103,551 97,431 1,916 2 8,036 8 Loans held for sale,
at fair value 526 478 369 48 10 157 43 Other loans held for sale —
372 51 (372 ) (100 ) (51 ) (100 ) Total loans and leases and loans
held for sale 105,993
104,401 97,851 1,592 2
8,142 8 Total period-end interest-earning assets
$ 134,417 $ 132,205 $ 123,257 $
2,212 2 % $ 11,160 9 %
Average interest-earning
assets Investments and interest-bearing deposits $ 27,090 $
26,007 $ 25,771 $ 1,083 4 % $ 1,319 5 % Commercial loans and leases
49,704 49,134 45,174 570 1 4,530 10 Retail loans 54,332 53,543
51,617 789 1 2,715 5 Total loans and leases 104,036 102,677 96,791
1,359 1 7,245 7 Loans held for sale, at fair value 474 368 327 106
29 147 45 Other loans held for sale 69 440 128 (371 ) NM (59 ) (46
) Total loans and leases and loans held for sale
104,579 103,485
97,246 1,094 1 7,333 8 Total average
interest-earning assets $ 131,669 $
129,492 $ 123,017 $ 2,177 2 % $ 8,652 7
%
Investments and interest-bearing deposits of $28.4 billion as of
September 30, 2016 increased $620 million, or 2%, compared with
June 30, 2016 and reflected an increase in securities, partially
offset by lower cash positions. Compared with September 30, 2015,
investments and interest-bearing deposits increased $3.0 billion,
or 12%. At the end of third quarter 2016, the average effective
duration of the securities portfolio increased to 2.7 years,
compared with 2.4 years at June 30, 2016 and 3.3 years at September
30, 2015, largely reflecting the continued low level of longer-term
interest rates, which has increased estimated prepayment
speeds.
Period-end loans and leases of $105.5 billion at September 30,
2016 increased $1.9 billion, or 2%, from $103.6 billion at June 30,
2016 and increased $8.0 billion, or 8%, from $97.4 billion at
September 30, 2015. The linked-quarter change was driven by a $1.1
billion increase in retail loans and an $832 million increase in
commercial loans. Compared with September 30, 2015, the period-end
loans and leases increase reflects a $5.1 billion increase in
commercial loans and leases and a $2.9 billion increase in retail
loans.
Average loans and leases of $104.0 billion increased $1.4
billion from second quarter 2016, driven by a $789 million increase
in retail and a $570 million increase in commercial loans. Retail
loan growth was primarily driven by mortgage, student and unsecured
retail loans, partially offset by lower home equity outstandings,
including continued runoff in the non-core portfolio. Commercial
loan and lease growth was driven by strength in Commercial Real
Estate, Mid-corporate and Industry Verticals and Franchise
Finance.
Compared with third quarter 2015, average loans and leases
increased $7.2 billion, or 7%, reflecting a $4.5 billion increase
in commercial and a $2.7 billion increase in retail loans.
Commercial loan growth was driven by strength in Commercial Real
Estate, Mid-corporate and Industry Verticals and Franchise Finance,
partially offset by lower Asset Finance loan balances. Retail loan
growth was driven by strength in student, residential mortgages,
unsecured retail loans and auto, partially offset by lower home
equity balances.
Deposits 3Q16 change
from ($s in millions)
3Q16
2Q16 3Q15 2Q16 3Q15
Period-end deposits $ % $
% Demand deposits $ 27,292 $ 27,108 $ 27,373 $
184 1 % $ (81 ) — % Checking with interest 20,573 19,838 18,350 735
4 2,223 12 Savings 8,797 8,841 8,011 (44 ) — 786 10 Money market
accounts 38,258 37,503 35,539 755 2 2,719 8 Term deposits
13,407 12,967
12,593 440 3 814 6 Total
period-end deposits $ 108,327 $ 106,257
$ 101,866 $ 2,070 2 % $ 6,461 6 %
Average deposits Demand deposits $ 27,467 $ 27,448 $ 26,754
$ 19 1 % $ 713 3 % Checking with interest 19,997 19,003 16,934 994
5 3,063 18 Savings 8,807 8,762 8,044 45 1 763 9 Money market
accounts 37,569 36,187 36,528 1,382 — 1,041 3 Term deposits
12,806 12,581
12,730 225 2 76 1 Total average
deposits $ 106,646 $ 103,981
$ 100,990 $ 2,665 3 % $ 5,656 6 %
Period-end total deposits at September 30, 2016 of $108.3
billion increased $2.1 billion, or 2%, from June 30, 2016 as growth
in money markets, checking with interest and term deposits was
partially offset by a decrease in savings. Compared with September
30, 2015, period-end total deposits increased $6.5 billion, or 6%,
driven largely by growth in money market and checking with interest
deposits.
Third quarter 2016 average deposits of $106.6 billion increased
$2.7 billion, or 3%, from second quarter 2016, driven by growth in
all categories. Compared with third quarter 2015, average deposits
increased $5.7 billion, or 6%, driven by growth in all
categories.
Borrowed funds 3Q16
change from ($s in millions)
3Q16
2Q16 3Q15 2Q16
3Q15 Period-end borrowed funds $
% $ % Federal funds purchased
and securities sold under agreements to repurchase $ 900 $ 717 $
1,293 $ 183 26 % $ (393 ) (30 ) % Other short-term borrowed funds
2,512 2,770 5,861 (258 ) (9 ) (3,349 ) (57 ) Long-term borrowed
funds 11,902 11,810
4,153 92 1 7,749
187 Total borrowed funds $ 15,314 $
15,297 $ 11,307 $ 17 — % $ 4,007 35 %
Average borrowed funds $ 14,379
$ 15,038 $ 12,001 $ (659 ) (4 ) % $ 2,378 20 %
Total borrowed funds of $15.3 billion at September 30, 2016
increased $17 million from June 30, 2016, reflecting an increase of
$92 million in long-term funding and a decrease of $75 million in
short-term funding. Compared with September 30, 2015, total
borrowed funds increased $4.0 billion, primarily reflecting an
increase in long-term borrowings. Average borrowed funds of $14.4
billion decreased $659 million from second quarter 2016 as growth
in deposits reduced our reliance on short-term borrowings. Average
borrowed funds increased $2.4 billion from third quarter 2015,
reflecting a $2.8 billion increase in senior debt partially offset
by subordinated debt redemptions and a further decline in
short-term borrowings. We continue to improve the strength of our
funding profile, including reducing our reliance on short-term
wholesale borrowings.
Capital 3Q16 change
from ($s and shares in millions)
3Q16
2Q16 3Q15
2Q16 3Q15 Period-end capital $
% $ % Stockholders'
equity $ 20,181 $ 20,226 $ 19,600 $ (45 ) — % $ 581 3 %
Stockholders' common equity 19,934 19,979 19,353 (45 ) — 581 3
Tangible common equity 13,576 13,608 12,939 (32 ) — 637 5 Tangible
book value per common share $ 26.20 $ 25.72 $ 24.52 $ 0.48 2 1.68 7
Common shares - at end of period 518.1 529.1 527.6 (10.9 ) (2 )
(9.5 ) (2 ) Common shares - average (diluted) 521.1 530.4 533.4
(9.2 ) (2 ) % (12.3 ) (2 ) % Common equity tier 1 capital
ratio(1,2) 11.3 % 11.5 % 11.8 % Total capital ratio(1,2) 14.2 14.9
15.4 Tier 1 leverage ratio(1,2) 10.1 %
10.3 % 10.4 %
1) Current reporting-period regulatory
capital ratios are preliminary
2) Basel III ratios assume that certain
definitions impacting qualifying Basel III capital will phase in
through 2019.
On September 30, 2016, our Basel III capital ratios on a
transitional basis remained well in excess of applicable regulatory
requirements with a CET1 capital ratio of 11.3% and a total capital
ratio of 14.2%. Our capital ratios continue to reflect progress
against our objective of realigning our capital profile to be more
consistent with that of peer regional banks, while maintaining a
strong capital base to support our growth aspirations, strategy and
risk appetite.
As part of the CFG’s 2016 Capital Plan (the “Plan”), during the
third quarter the company repurchased 11.1 million shares at an
average price of $22.60 per share. Tangible book value per common
share of $26.20 increased 2% versus second quarter 2016 and 7%
versus third quarter 2015. The Plan includes the repurchase of up
to $690 million of Citizens’ outstanding common stock beginning in
third quarter 2016 through second quarter 2017. The Plan also
provides for proposed quarterly dividends of $0.12 per share
through the end of 2016 and the potential to raise the quarterly
dividend to $0.14 per share in 2017. Proposed capital actions are
subject to consideration and approval by CFG’s Board of
Directors.
Credit quality review
3Q16 change from ($s in millions)
3Q16
2Q16 3Q15
2Q16 3Q15 $ % $
% Nonperforming loans and leases $ 1,107 $
1,044 $ 1,034 $ 63 6 % $ 73 7 % Net charge-offs 83 65 75 18 28 8 11
Provision for credit losses 86 90 76 (4 ) (4 ) 10 13 Allowance for
loan and lease losses $ 1,240 $ 1,246 $ 1,201 $ (6 ) — % $ 39 3 %
Total nonperforming loans and leases
as a % of total loans and leases
1.05 % 1.01 % 1.06 % 4 bps (1 ) bps Net charge-offs as % of total
loans and leases 0.32 0.25 0.31 7 bps 1 bps Allowance for loan and
lease losses as a % of total loans and leases 1.18 % 1.20 % 1.23 %
(2 ) bps (5 ) bps Allowance for loan and lease losses as a % of
nonperforming loans and leases 112.03 %
119.27 % 116.12 % (724 )
bps (409 ) bps
Overall credit quality remained strong and broadly stable.
Nonperforming loans and net charge-offs both increased during the
quarter, largely tied to commercial energy and commodity-related
borrowers. Nonperforming loans and leases of $1.1 billion at
September 30, 2016 increased $63 million from June 30, 2016 and $73
million from September 30, 2015. The nonperforming loans and leases
to total loans and leases ratio of 1.05% at September 30, 2016
compares with 1.01% at June 30, 2016 and 1.06% at September 30,
2015.
Net charge-offs of $83 million increased $18 million from
relatively low second quarter 2016 levels, driven by a $17 million
increase in commercial that included $14 million tied to the energy
portfolio. Retail net charge-offs of $64 million remained broadly
stable with relatively low second quarter 2016 levels, largely as a
seasonal increase in the auto portfolio and an increase in
deposit-account losses were largely offset by improvement in real
estate-secured categories. Compared with third quarter 2015, net
charge offs increased $8 million as a $14 million increase in
commercial, largely related to the energy portfolio, was partially
offset by a $6 million decrease in retail given declines in
consumer real-estate secured. Third quarter 2016 net charge-offs of
32 basis points of average loans and leases compares with 25 basis
points in second quarter 2016 and 31 basis points in third quarter
2015.
Allowance for loan and lease losses of $1.2 billion was
relatively stable compared to second quarter 2016 and increased $39
million, or 3%, from third quarter 2015, largely reflecting
continued loan growth.
Allowance for loan and lease losses to total loans and leases
was 1.18% as of September 30, 2016, relatively stable compared with
1.20% as of June 30, 2016 and 1.23% as of September 30, 2015.
Allowance for loan and lease losses to the nonperforming loans and
leases ratio decreased to 112% as of September 30, 2016 from 119%
as of June 30, 2016 and 116% as of September 30, 2015, given the
higher level of nonperforming loans and leases.
Additional Segment Detail:
Consumer Banking Segment
3Q16 change from ($s in millions)
3Q16
2Q16 3Q15
2Q16 3Q15 $ % $
% Net interest income $ 621 $ 602 $ 556 $ 19 3
% $ 65 12 % Noninterest income 229
219 235 10
5 (6 ) (3 ) Total revenue 850 821 791 29 4 59 7
Noninterest expense 650
632 623 18 3
27 4 Pre-provision profit 200 189 168 11 6 32 19
Provision for credit losses 57
49 64 8 16
(7 ) (11 ) Income before income tax expense 143 140 104 3 2
39 38 Income tax expense 51
50 36 1 2
15 42 Net income $ 92
$ 90 $ 68 $ 2 2 % $ 24 35
% Average balances
Total loans and
leases (1) $ 55,376 $ 54,353 $ 51,886 $ 1,023 2 % $ 3,490 7 % Total
deposits 72,141
71,863 70,527 278 — %
1,614 2 % Key performance metrics*
ROTCE (2) 7.0 % 7.1 % 5.7
% (5 ) bps 137 bps Efficiency ratio 76 % 77 % 79 % (52 ) bps (226 )
bps Loan-to-deposit ratio (period-end)(1) 77.2 % 76.1
% 74.4 % 116 bps 286 bps
1) Includes held for sale.
2) Operating segments are allocated
capital on a risk-adjusted basis considering economic and
regulatory capital requirements. We approximate that regulatory
capital is equivalent to a sustainable target level of common
equity tier 1 and then allocate that approximation to the segments
based on economic capital.
Consumer Banking net income of $92 million in third quarter 2016
increased $2 million, or 2%, compared to second quarter 2016,
reflecting a $29 million increase in total revenue offset by an $18
million increase in noninterest expense and $8 million increase in
provision for credit losses. Net interest income increased $19
million, or 3%, from second quarter 2016, reflecting the benefit of
a $916 million increase in average loans led by higher mortgage and
student balances and improved loan yields. Noninterest income
increased $10 million, or 5%, from second quarter 2016, driven by
$8 million in higher mortgage banking fees, which reflects the
benefit of higher application and origination volumes with improved
secondary mix and increased loan sales and spreads, partially
offset by a slight decrease in MSR valuations. Results also include
higher service charges and fees, reflecting an additional day in
the quarter and improved pricing and volumes. Noninterest expense
increased $18 million, or 3%, from second quarter 2016, as a
decrease in salaries and benefits was more than offset by $7
million of home equity systems and operational costs included in
notable items, as well as higher other operational costs. Provision
for credit losses of $57 million increased $8 million from lower
second quarter 2016 levels, driven by higher net charge-offs in
auto.
Compared with third quarter 2015, net income increased $24
million, or 35%, as revenue growth and lower provision for credit
losses were partially offset by an increase in noninterest expense.
Net interest income increased $65 million, or 12%, driven by a $3.4
billion increase in average loans, reflecting growth in student,
mortgage, consumer unsecured and auto loans as well as improved
loan and deposit spreads. Noninterest income decreased $6 million,
or 3%, from higher third quarter 2015 levels, which were $16
million higher due to the card reward accounting change and a
branch sale gain. Underlying results reflect growth in mortgage
banking fees and service charges and fees. Noninterest expense
increased $27 million, or 4%, driven by higher salaries and
benefits given continued investments to drive growth. Results also
reflect an increase in outside services, driven by continued
product extension and the impact of systems and operational notable
items, as well as increased fraud costs and software amortization
expense. Provision for credit losses declined $7 million from third
quarter 2015, driven by lower net charge-offs in home equity.
Commercial Banking
Segment 3Q16 change from ($s in millions)
3Q16 2Q16
3Q15 2Q16 3Q15 $ %
$ % Net interest income $ 327 $ 314 $
299 $ 13 4 % $ 28 9 % Noninterest income 123
122
100 1 1 23 23 Total revenue 450 436 399
14 3 51 13 Noninterest expense 181
186 175
(5 ) (3 ) 6 3 Pre-provision profit 269 250 224
19 8 45 20 Provision for credit losses 19
(1 ) 3
20 NM 16 NM Income before income tax
expense 250 251 221 (1 ) (0 ) 29 13 Income tax expense
88 87
76 1 1 12 16 Net
income $ 162 $ 164
$ 145 $ (2 ) (1 ) % $ 17 12 % Average
balances
Total loans and leases (1) $
46,611 $ 46,073 $ 41,993 $ 538 1 % $ 4,618 11 % Total deposits
27,847 25,113
24,604 2,734 11 %
3,243 13 % Key performance metrics*
ROTCE (2) 12.5 % 13.0 %
12.2 % (54 ) bps 26 bps Efficiency ratio 40 % 43 % 44 % (267 ) bps
(354 ) bps Loan-to-deposit ratio (period-end)(1)
161.4 % 172.6 % 166.0 % (1,120 )
bps (457 ) bps
1) Includes held for sale.
2) Operating segments are allocated
capital on a risk-adjusted basis considering economic and
regulatory capital requirements. We approximate that regulatory
capital is equivalent to a sustainable target level for common
equity tier 1 and then allocate that approximation to the segments
based on economic capital.
Commercial Banking net income of $162 million in third quarter
2016 remained relatively stable with second quarter 2016, as a 3%
increase in revenue and a 3% decrease in noninterest expense was
more than offset by a $20 million increase in provision expense.
Net interest income of $327 million increased $13 million compared
to second quarter 2016, driven by higher deposit and loan balances.
Average loans and leases, excluding loans held for sale, increased
$618 million led by Franchise Finance, Commercial Real Estate and
Mid-corporate and Industry Verticals. Noninterest income remained
relatively stable, as modest growth in service charges and fees,
interest rate products and foreign exchange fees was offset by a
slight decrease in capital markets fees from record second quarter
levels, and lower leasing income. Noninterest expense decreased $5
million, reflecting seasonally lower salaries and benefits and the
benefit of efficiency initiatives and lower regulatory costs,
partially offset by higher FDIC insurance costs. Provision for
credit losses increased $20 million from second quarter levels,
driven largely by higher net charge-offs related to the energy
portfolio.
Compared to third quarter 2015, net income increased $17
million, or 12%, as a $51 million increase in total revenue was
partially offset by higher noninterest expense and provision for
credit losses. Net interest income increased $28 million, or 9%,
from third quarter 2015, reflecting the benefit of a $4.7 billion
increase in average loans and leases, improved deposit spreads and
a $3.2 billion increase in average deposits. Average loan and lease
growth was driven by strength in Mid-corporate and Industry
Verticals, Commercial Real Estate and Franchise Finance.
Noninterest income increased $23 million from third quarter 2015
levels, reflecting strength in capital markets, service charges and
fees and interest rate products. Noninterest expense increased $6
million from third quarter 2015, largely reflecting an increase in
salaries and employee benefits, FDIC insurance costs and
amortization of software, partially offset by lower outside
services expense. Provision for credit losses increased $16 million
from third quarter 2015 levels, largely reflecting higher net
charge-offs in the energy portfolio.
Other(1) 3Q16
change from ($s in millions)
3Q16
2Q16 3Q15 2Q16
3Q15 $ % $ % Net
interest income $ (3 ) $ 7 $ 1 $ (10 ) (143 ) % $ (4 ) NM
Noninterest income 83
14 18 69 NM
65 NM Total revenue 80 21 19 59 NM 61 NM Noninterest expense
36 9
— 27 NM 36 100
Pre-provision profit (loss) 44 12 19 32 NM 25 132 Provision for
credit losses 10
42 9 (32 ) (76 ) 1
11 Income (loss) before income tax expense (benefit) 34 (30 ) 10 64
NM 24 NM Income tax expense (benefit) (9 )
(19 ) 3 10
53 (12 ) NM Net income (loss) $ 43
$ (11 ) $ 7 $ 54 NM $ 36
NM Average balances
Total loans and leases
(2) $ 2,592 $ 3,059 $ 3,367 $ (467 ) (15 ) % $ (775 ) (23 ) % Total
deposits 6,658
7,005 5,859 (347 ) (5 ) %
799 14 %
1) Includes the financial impact of
non-core, liquidating loan portfolios and other non-core assets,
our treasury activities, wholesale funding activities, securities
portfolio, community development assets and other unallocated
assets, liabilities, revenues, provision for credit losses and
expenses not attributed to our Consumer Banking or Commercial
Banking segments.
2) Includes held for sale.
Other recorded net income of $43 million in third quarter 2016
compared to a net loss of $11 million in second quarter 2016. The
increase was largely driven by the net impact of $15 million in
notable items and a $32 million reduction in provision for credit
losses. Net interest income of negative $3 million decreased $10
million from second quarter 2016, reflecting higher borrowing costs
related to term-debt issuance and lower residual funds transfer
pricing. Noninterest income of $83 million increased $69 million
from second quarter 2016, largely reflecting the TDR Transaction
gain. Noninterest expense increased $27 million, driven by the
impact of other notable items. Provision for credit losses of $10
million in third quarter 2016 decreased $32 million from second
quarter 2016 and reflected a $3 million reserve build compared with
a $25 million reserve build in second quarter 2016. Provision
expense also reflects continued reduction in non-core
charge-offs.
Other net income in third quarter 2016 increased $36 million
from third quarter 2015, driven by the net impact of notable items
and an income tax benefit.
Corresponding Financial Tables and
Information
Investors are encouraged to review the foregoing summary and
discussion of Citizens' earnings and financial condition in
conjunction with the detailed financial tables and other
information available on the Investor Relations portion of the
company’s website at www.citizensbank.com/about-us.
Conference Call
CFG management will host a live conference call today with
details as follows:
Time: 8:30 am ET Dial-in: (800) 230 1059,
conference ID 398961 Webcast/Presentation: The live webcast
will be available at http://investor.citizensbank.com under Events
& Presentations
Replay Information: A replay of the conference call will be
available beginning at 10:30 am ET on October 21 through November
21, 2016. Please dial (800) 475-6701 and enter access code 398961.
The webcast replay will be available at
http://investor.citizensbank.com under Events &
Presentations.
About Citizens Financial Group,
Inc.
Citizens Financial Group, Inc. is one of the nation’s oldest and
largest financial institutions, with $147.0 billion in assets as of
September 30, 2016. Headquartered in Providence, Rhode Island,
Citizens offers a broad range of retail and commercial banking
products and services to individuals, small businesses,
middle-market companies, large corporations and institutions. In
Consumer Banking, Citizens helps its retail customers “bank better”
with mobile and online banking, a 24/7 customer contact center and
the convenience of approximately 3,200 ATMs and approximately 1,200
Citizens Bank branches in 11 states in the New England,
Mid-Atlantic and Midwest regions. Citizens also provides wealth
management, mortgage lending, auto lending, student lending and
commercial banking services in select markets nationwide. In
Commercial Banking, Citizens offers corporate, institutional and
not-for-profit clients a full range of wholesale banking products
and services including lending and deposits, capital markets,
treasury services, foreign exchange and interest hedging, leasing
and asset finance, specialty finance and trade finance. Citizens
operates through its subsidiaries Citizens Bank, N.A. and Citizens
Bank of Pennsylvania as Citizens Bank, Citizens Commercial Banking
and Citizens One. Additional information about Citizens and its
full line of products and services can be found at
www.citizensbank.com.
Key Performance Metrics and Non-GAAP
Financial Measures
Key Performance Metrics:
Our management team uses certain key performance metrics
(“KPMs”) to gauge our performance and progress over time in
achieving our strategic and operational goals and also in comparing
our performance against our peers. In connection with our path to
becoming an independent public company, we established the
following financial targets, in addition to others, as KPMs. These
KPMs are utilized by our management in measuring our progress
against financial goals and as a tool in helping assess performance
for compensation purposes. These KPMs can largely be found in our
Registration Statements on Form S-1 and our periodic reports, which
are filed with the Securities and Exchange Commission, and are
supplemented from time to time with additional information in
connection with our quarterly earnings releases.
Our key performance metrics
include:
Return on average tangible common equity
(“ROTCE”);
Return on average total tangible assets
(“ROTA”);
Efficiency ratio;
Operating leverage; and
Common equity tier 1 capital ratio (Basel
III fully phased-in basis).
In establishing goals for these KPMs, we determined that they
would be measured on a management-reporting basis, or an operating
basis, which we refer to externally as “Adjusted” results. We
believe that these “Adjusted” results, which exclude restructuring
charges, special items and/or notable items, as applicable, provide
the best representation of our underlying financial progress toward
these goals as they exclude items that our management does not
consider indicative of our on-going financial performance. We have
consistently shown these metrics on this basis to investors since
our initial public offering in September of 2014. Adjusted KPMs are
considered non-GAAP financial measures.
Non-GAAP Financial Measures:
This document contains non-GAAP financial measures. The tables
below present reconciliations of certain non-GAAP measures. These
reconciliations exclude restructuring charges, special items and/or
notable items, which are included, where applicable, in the
financial results presented in accordance with GAAP. Restructuring
charges and special items include expenses related to our efforts
to improve processes and enhance efficiencies, as well as
rebranding, separation from RBS and regulatory expenses. Notable
items include certain revenue or expense items that may occur in a
reporting period, which management does not consider indicative of
on-going financial performance.
The non-GAAP measures presented below include “noninterest
income”, “total revenue”, “noninterest expense”, “pre-provision
profit”, “income before income tax expense”, “income tax expense”,
“net income”, “net income available to common stockholders”, “other
income”, “salaries and employee benefits”, “outside services”,
“occupancy”, “equipment expense”, “other operating expense”, and
“net income per average common share”, “return on average common
equity” and “return on average total assets”.
We believe these non-GAAP measures provide useful information to
investors because these are among the measures used by our
management team to evaluate our operating performance and make
day-to-day operating decisions. In addition, we believe
restructuring charges, special items and/or notable items in any
period do not reflect the operational performance of the business
in that period and, accordingly, it is useful to consider these
line items with and without restructuring charges, special items
and/or notable items. We believe this presentation also increases
comparability of period-to-period results.
Other companies may use similarly titled non-GAAP financial
measures that are calculated differently from the way we calculate
such measures. Accordingly, our non-GAAP financial measures may not
be comparable to similar measures used by other companies. We
caution investors not to place undue reliance on such non-GAAP
measures, but instead to consider them with the most directly
comparable GAAP measure. Non-GAAP financial measures have
limitations as analytical tools and should not be considered in
isolation, or as a substitute for our results as reported under
GAAP.
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 2016 2015 2015 $ %
$ % $ % Noninterest income,
adjusted: Noninterest income (GAAP) $435 $355 $330 $362 $353
$80 23 % $82 23 % $1,120 $1,060 $60 6 % Less: Special items — — — —
— — — — — — — — — Less: Notable items 67 — — — — 67
100 67 100 67 — 67 100 Noninterest
income, adjusted (non-GAAP) $368 $355 $330 $362 $353 $13
4 % $15 4 % $1,053 $1,060 ($7 ) (1 %)
Total revenue, adjusted: Total revenue (GAAP) A $1,380
$1,278 $1,234 $1,232 $1,209 $102 8 % $171 14 % $3,892 $3,592 $300 8
% Less: Special items — — — — — — — — — — — — — Less: Notable items
67 — — — — 67 100 67 100 67 — 67
100 Total revenue, adjusted (non-GAAP) B $1,313
$1,278 $1,234 $1,232 $1,209 $35 3 % $104 9 % $3,825
$3,592 $233 6 %
Noninterest expense,
adjusted: Noninterest expense (GAAP) C $867 $827 $811 $810 $798
$40 5 % $69 9 % $2,505 $2,449 $56 2 % Less: Restructuring charges
and special items — — — — — — — — — — 50 (50 ) (100 ) Less: Notable
items 36 — — — — 36 100 36 100 36 —
36 100 Noninterest expense, adjusted (non-GAAP) D
$831 $827 $811 $810 $798 $4 — % $33 4 % $2,469
$2,399 $70 3 %
Pre-provision profit,
adjusted: Total revenue, adjusted (non-GAAP) $1,313 $1,278
$1,234 $1,232 $1,209 $35 3 % $104 9 % $3,825 $3,592 $233 6 % Less:
Noninterest expense, adjusted (non-GAAP) 831 827 811 810 798
4 — 33 4 2,469 2,399 70 3
Pre-provision profit, adjusted (non-GAAP) $482 $451 $423
$422 $411 $31 7 % $71 17 % $1,356 $1,193
$163 14 %
Income before income tax expense,
adjusted: Income before income tax expense (GAAP) $427 $361
$332 $331 $335 $66 18 % $92 27 % $1,120 $932 $188 20 %
Less: Income before income tax expense
(benefit) related to restructuringcharges and special items
— — — — — — — — — — (50 ) 50 100 Less: Income before income tax
expense (benefit) related to notable items 31 — — — — 31
100 31 100 31 — 31 100 Income
before income tax expense, adjusted (non-GAAP) $396 $361
$332 $331 $335 $35 10 % $61 18 % $1,089 $982
$107 11 %
Income tax expense, adjusted: Income
tax expense (GAAP) $130 $118 $109 $110 $115 $12 10 % $15 13 % $357
$313 $44 14 %
Less: Income tax expense (benefit) related
to restructuring charges andspecial items
— — — — — — — — — — (19 ) 19 100 Less: Income tax expense (benefit)
related to notable items 12 — — — — 12 100 12
100 12 — 12 100 Income tax expense, adjusted
(non-GAAP) $118 $118 $109 $110 $115 $— — % $3
3 % $345 $332 $13 4 %
Net income,
adjusted: Net income (GAAP) E $297 $243 $223 $221 $220 $54 22 %
$77 35 % $763 $619 $144 23 % Add: Restructuring charges and special
items, net of income tax expense (benefit) — — — — — — — — — — 31
(31 ) (100 ) Add: Notable items, net of income tax expense
(benefit) (19 ) — — — — (19 ) 100 (19 ) 100 (19 ) — (19 )
100 Net income, adjusted (non-GAAP) F $278 $243 $223 $221
$220 $35 14 % $58 26 % $744 $650 $94
14 %
Net income available to common stockholders,
adjusted: Net income available to common stockholders (GAAP) G
$290 $243 $216 $221 $213 $47 19 % $77 36 % $749 $612 $137 22 %
Add: Restructuring charges and special
items, net of income tax expense(benefit)
— — — — — — — — — — 31 (31 ) (100 )
Add: Notable items, net of income tax
expense(benefit)
(19 ) — — — — (19 ) 100 (19 ) 100 (19 ) — (19 ) 100 Net
income available to common stockholders, adjusted (non-GAAP) H $271
$243 $216 $221 $213 $28 12 % $58 27 % $730
$643 $87 14 %
Key performance metrics, non-GAAP
financial measures and reconciliations(Adjusted excluding
restructuring charges, special items and/or notable items)($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 2016 2015
2015 $/bps % $/bps %
$/bps % Operating leverage:
Total revenue (GAAP) A $1,380 $1,278 $1,234 $1,232 $1,209 $102 7.98
% $171 14.14 % $3,892 $3,592 $300 8.35 % Less: Noninterest expense
(GAAP) C 867 827 811 810 798 40 4.84 69 8.65 2,505
2,449 56 2.29 Operating leverage 3.14 % 5.49 % 6.06 %
Operating leverage, adjusted: Total revenue, adjusted
(non-GAAP) B $1,313 $1,278 $1,234 $1,232 $1,209 $35 2.74 % $104
8.60 % $3,825 $3,592 $233 6.49 % Less: Noninterest expense,
adjusted (non-GAAP) D 831 827 811 810 798 4 0.48 33 4.14
2,469 2,399 70 2.92 Operating leverage, adjusted
(non-GAAP) 2.26 % 4.46 % 3.57 %
Return on average common equity
and return on average common equity, adjusted: Average common
equity (GAAP) I $19,810 $19,768 $19,567 $19,359 $19,261 $42 — %
$549 3 % $19,715 $19,352 $363 2 % Return on average common equity
G/I 5.82 % 4.94 % 4.45 % 4.51 % 4.40 % 88 bps 142 bps 5.08 % 4.23 %
85 bps Return on average common equity, adjusted (non-GAAP) H/I
5.44 4.94 4.45 4.51 4.40 50 bps 104 bps 4.95 4.45 50 bps
Return
on average tangible common equity and return on average tangible
common equity, adjusted: Average common equity (GAAP) I $19,810
$19,768 $19,567 $19,359 $19,261 $42 — % $549 3 % $19,715 $19,352
$363 2 % Less: Average goodwill (GAAP) 6,876 6,876 6,876 6,876
6,876 — — — — 6,876 6,876 — — Less: Average other intangibles
(GAAP) 1 2 3 3 4 (1 ) (50 ) (3 ) (75 ) 2 5 (3 ) (60 ) Add: Average
deferred tax liabilities related to goodwill (GAAP) 509 496
481 468 453 13 3 56 12
495 438 57 13 Average tangible common
equity J $13,442 $13,386 $13,169 $12,948
$12,834 $56 — % $608 5 % $13,332
$12,909 $423 3 % Return on average tangible common
equity G/J 8.58 % 7.30 % 6.61 % 6.75 % 6.60 % 128 bps 198 bps 7.51
% 6.34 % 117 bps Return on average tangible common equity, adjusted
(non-GAAP) H/J 8.02 7.30 6.61 6.75 6.60 72 bps 142 bps 7.32 6.67 65
bps
Return on average total assets and return on average total
assets, adjusted: Average total assets (GAAP) K $144,399
$142,179 $138,780 $136,298 $135,103 $2,220 2 % $9,296 7 % $141,795
$134,655 $7,140 5 % Return on average total assets E/K 0.82 % 0.69
% 0.65 % 0.64 % 0.65 % 13 bps 17 bps 0.72 % 0.62 % 10 bps Return on
average total assets, adjusted (non-GAAP) F/K 0.77 0.69 0.65 0.64
0.65 8 bps 12 bps 0.70 0.65 5 bps
Return on average total
tangible assets and return on average total tangible assets,
adjusted: Average total assets (GAAP) K $144,399 $142,179
$138,780 $136,298 $135,103 $2,220 2 % $9,296 7 % $141,795 $134,655
$7,140 5 % Less: Average goodwill (GAAP) 6,876 6,876 6,876 6,876
6,876 — — — — 6,876 6,876 — — Less: Average other intangibles
(GAAP) 1 2 3 3 4 (1 ) (50 ) (3 ) (75 ) 2 5 (3 ) (60 ) Add: Average
deferred tax liabilities related to goodwill (GAAP) 509 496
481 468 453 13 3 56 12
495 438 57 13 Average tangible assets L
$138,031 $135,797 $132,382 $129,887
$128,676 $2,234 2 % $9,355 7 % $135,412
$128,212 $7,200 6 % Return on average total tangible
assets E/L 0.86 % 0.72 % 0.68 % 0.67 % 0.68 % 14 bps 18 bps 0.75 %
0.65 % 10 bps Return on average total tangible assets, adjusted
(non-GAAP) F/L 0.80 0.72 0.68 0.67 0.68 8 bps 12 bps 0.73 0.68 5
bps
Key performance metrics, non-GAAP
financial measures and reconciliations(Adjusted excluding
restructuring charges, special items and/or notable items)($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
2016 2015 2015 $/bps
% $/bps % $/bps
% Efficiency ratio and efficiency ratio,
adjusted: Efficiency ratio C/A 62.88 % 64.71 % 65.66 % 65.76 %
66.02 % (183 ) bps (314 ) bps 64.36 % 68.17 % (381 ) bps Efficiency
ratio, adjusted (non-GAAP) D/B 63.31 64.71 65.66 65.76 66.02 (140 )
bps (271 ) bps 64.54 66.78 (224 ) bps
Tangible book value per
common share: Common shares - at end of period (GAAP) M
518,148,345 529,094,976 528,933,727 527,774,428 527,636,510
(10,946,631 ) (2 %) (9,488,165 ) (2 %) 518,148,345 527,636,510
(9,488,165 ) (2 %) Common stockholders' equity (GAAP) $19,934
$19,979 $19,718 $19,399 $19,353 ($45 ) — $581 3 $19,934 $19,353
$581 3 Less: Goodwill (GAAP) 6,876 6,876 6,876 6,876 6,876 — — — —
6,876 6,876 — — Less: Other intangible assets (GAAP) 1 2 3 3 3 (1 )
(50 ) (2 ) (67 ) 1 3 (2 ) (67 ) Add: Deferred tax liabilities
related to goodwill (GAAP) 519 507 494 480
465 12 2 54 12 519 465 54
12 Tangible common equity N $13,576 $13,608
$13,333 $13,000 $12,939 ($32 ) — % $637
5 % $13,576 $12,939 $637 5 % Tangible book
value per common share N/M $26.20 $25.72 $25.21 $24.63 $24.52 $0.48
2 % $1.68 7 % $26.20 $24.52 $1.68 7 %
Net income per average
common share - basic and diluted, adjusted: Average common
shares outstanding - basic (GAAP) O 519,458,976 528,968,330
528,070,648 527,648,630 530,985,255 (9,509,354 ) (2 %) (11,526,279
) (2 %) 525,477,273 538,279,222 (12,801,949 ) (2 %) Average common
shares outstanding - diluted (GAAP) P 521,122,466 530,365,203
530,446,188 530,275,673 533,398,158 (9,242,737 ) (2 ) (12,275,692 )
(2 ) 527,261,384 540,926,361 (13,664,977 ) (3 ) Net income
available to common stockholders (GAAP) G $290 $243 $216 $221 $213
$47 19 $77 36 $749 $612 $137 22 Net income per average common share
- basic (GAAP) G/O 0.56 0.46 0.41 0.42 0.40 0.10 22 0.16 40 1.43
1.14 0.29 25 Net income per average common share - diluted (GAAP)
G/P 0.56 0.46 0.41 0.42 0.40 0.10 22 0.16 40 1.42 1.13 0.29 26 Net
income available to common stockholders, adjusted (non-GAAP) H 271
243 216 221 213 28 12 58 27 730 643 87 14 Net income per average
common share - basic, adjusted (non-GAAP) H/O 0.52 0.46 0.41 0.42
0.40 0.06 13 0.12 30 1.39 1.20 0.19 16 Net income per average
common share - diluted, adjusted (non-GAAP) H/P 0.52 0.46 0.41 0.42
0.40 0.06 13 0.12 30 1.39 1.19 0.20 17
Pro forma Basel III fully
phased-in common equity tier 1 capital ratio1:
Common equity tier 1 (regulatory) $13,763 $13,768 $13,570 $13,389
$13,200 Less: Change in DTA and other threshold deductions (GAAP) —
1 1 2 2 Pro forma Basel III
fully phased-in common equity tier 1 Q $13,763 $13,767
$13,569 $13,387 $13,198 Risk-weighted
assets (regulatory general risk weight approach) $121,612 $119,492
$116,591 $114,084 $112,277 Add: Net change in credit and other
risk-weighted assets (regulatory) 228 228 232
244 243 Pro forma Basel III standardized approach
risk-weighted assets R $121,840 $119,720 $116,823
$114,328 $112,520 Pro forma Basel III fully
phased-in common equity tier 1 capital ratio1 Q/R 11.3 % 11.5 %
11.6 % 11.7 % 11.7 % 1) Basel III ratios assume certain
definitions impacting qualifying Basel III capital, which otherwise
will phase in through 2019, are fully phased-in. Ratios also
reflect the required US Standardized methodology for calculating
RWAs, effective January 1, 2015.
Key performance metrics, non-GAAP
financial measures and reconciliations(Adjusted excluding
restructuring charges, special items and/or notable items)($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 2016 2015
2015 $ % $ % $
% Other income, adjusted Other income
(GAAP) $90 $18 $16 $23 $30 $72 NM $60 200 % $124 $71 $53 75 % Less:
Special items — — — — — — — — — — — — — Less: Notable items 67 — —
— — 67 100 67 100 67 — 67 100 Other
income, adjusted (non-GAAP) $23 $18 $16 $23 $30 $5 28
% ($7 ) (23 %) $57 $71 ($14 ) (20 %)
Salaries and employee
benefits, adjusted: Salaries and employee benefits (GAAP) $432
$432 $425 $402 $404 $— — % $28 7 % $1,289 $1,234 $55 4 % Less:
Restructuring charges and special items — — — (2 ) — — — — — — 5 (5
) (100 ) Less: Notable items 11 — — — — 11 100 11
100 11 — 11 100 Salaries and employee benefits,
adjusted (non-GAAP) $421 $432 $425 $404 $404 ($11 ) (3 %)
$17 4 % $1,278 $1,229 $49 4 %
Outside services,
adjusted: Outside services (GAAP) $102 $86 $91 $104 $89 $16 19
% $13 15 % $279 $267 $12 4 % Less: Restructuring charges and
special items — — — 2 — — — — — — 24 (24 ) (100 ) Less: Notable
items 8 — — — — 8 100 8 100 8 — 8 100
Outside services, adjusted (non-GAAP) $94 $86 $91 $102 $89
$8 9 % $5 6 % $271 $243 $28 12 %
Occupancy,
adjusted: Occupancy (GAAP) $78 $76 $76 $74 $75 $2 3 % $3 4 %
$230 $245 ($15 ) (6 %) Less: Restructuring charges and special
items — — — — — — — — — — 17 (17 ) (100 ) Less: Notable items — — —
— — — — — — — — — — Occupancy, adjusted
(non-GAAP) $78 $76 $76 $74 $75 $2 3 % $3 4 %
$230 $228 $2 1 %
Equipment expense, adjusted:
Equipment expense (GAAP) $65 $64 $65 $67 $62 $1 2 % $3 5 % $194
$190 $4 2 % Less: Restructuring charges and special items — — — — —
— — — — — 1 (1 ) (100 ) Less: Notable items — — — — — —
— — — — — — — Equipment expense, adjusted
(non-GAAP) $65 $64 $65 $67 $62 $1 2 % $3 5 %
$194 $189 $5 3 %
Amortization of software, adjusted:
Amortization of software (GAAP) $46 $41 $39 $38 $35 $5 12 % $11 31
% $126 $108 $18 17 % Less: Restructuring charges and special items
— — — — — — — — — — — — — Less: Notable items 3 — — — — 3
100 3 100 3 — 3 100 Amortization of software,
adjusted (non-GAAP) $43 $41 $39 $38 $35 $2 5 % $8
23 % $123 $108 $15 14 %
Other operating expense,
adjusted: Other operating expense (GAAP) $144 $128 $115 $125
$133 $16 13 % $11 8 % $387 $405 ($18 ) (4 %) Less: Restructuring
charges and special items — — — — — — — — — — 3 (3 ) (100 ) Less:
Notable items 14 — — — — 14 100 14 100 14 — 14
100 Other operating expense, adjusted (non-GAAP) $130 $128
$115 $125 $133 $2 2 % ($3 ) (2 %) $373 $402 ($29 ) (7
%)
Restructuring charges, special expense items and notable
expense items include: Restructuring charges $— $— $— $— $— $—
— % $— — % $— $26 ($26 ) (100 )% Special items — — — — — — — — — —
24 (24 ) (100 ) Notable items 36 — — — — 36 100 36
100 36 — 36 100 Restructuring charges, special
expense items and notable expense items $36 $— $— $— $— $36
100 % $36 100 % $36 $50 ($14 ) (28 %)
Key performance metrics, non-GAAP
financial measures and reconciliations – segments($s in
millions)
THREE MONTHS ENDED SEPT 30, THREE MONTHS
ENDED JUNE 30, 2016 2016
ConsumerBanking
CommercialBanking
Other Consolidated
ConsumerBanking
CommercialBanking
Other Consolidated Net income available to common
stockholders: Net income (GAAP) A $92 $162 $43 $297 $90 $164
($11 ) $243 Less: Preferred stock dividends — — 7
7 — — — — Net income
available to common stockholders B $92 $162 $36
$290 $90 $164 ($11 ) $243
Return on average tangible common equity: Average common
equity (GAAP) $5,190 $5,172 $9,448 $19,810 $5,110 $5,040 $9,618
$19,768 Less: Average goodwill (GAAP) — — 6,876 6,876 — — 6,876
6,876 Average other intangibles (GAAP) — — 1 1 — — 2 2 Add: Average
deferred tax liabilities related to goodwill (GAAP) — —
509 509 — — 496 496
Average tangible common equity C $5,190 $5,172
$3,080 $13,442 $5,110 $5,040 $3,236
$13,386 Return on average tangible common equity B/C
7.04 % 12.50 % NM 8.58 % 7.09 % 13.04 % NM 7.30 %
Return on
average total tangible assets: Average total assets (GAAP)
$56,689 $47,902 $39,808 $144,399 $55,660 $47,388 $39,131 $142,179
Less: Average goodwill (GAAP) — — 6,876 6,876 — — 6,876 6,876
Average other intangibles (GAAP) — — 1 1 — — 2 2 Add: Average
deferred tax liabilities related to goodwill (GAAP) — —
509 509 — — 496 496
Average tangible assets D $56,689 $47,902
$33,440 $138,031 $55,660 $47,388
$32,749 $135,797 Return on average total tangible
assets A/D 0.64 % 1.35 % NM 0.86 % 0.65 % 1.39 % NM 0.72 %
Efficiency ratio: Noninterest expense (GAAP) E $650 $181 $36
$867 $632 $186 $9 $827 Net interest income (GAAP) 621 327 (3 ) 945
602 314 7 923 Noninterest income (GAAP) 229 123 83
435 219 122 14 355 Total
revenue (GAAP) F $850 $450 $80 $1,380
$821 $436 $21 $1,278 Efficiency ratio
E/F 76.46 % 40.21 % NM 62.88 % 76.98 % 42.88 % NM 64.71 %
THREE MONTHS ENDED MAR 31, THREE MONTHS ENDED DEC 31,
2016 2015
ConsumerBanking
CommercialBanking
Other
Consolidated
ConsumerBanking
CommercialBanking
Other Consolidated Net income available to common
stockholders: Net income (loss) (GAAP) A $71 $133 $19 $223 $67
$152 $2 $221 Less: Preferred stock dividends — — 7
7 — — — — Net income
available to common stockholders B $71 $133 $12
$216 $67 $152 $2 $221
Return on average tangible common equity: Average common
equity (GAAP) $5,089 $4,790 $9,688 $19,567 $4,831 $4,787 $9,741
$19,359 Less: Average goodwill (GAAP) — — 6,876 6,876 — — 6,876
6,876 Average other intangibles (GAAP) — — 3 3 — — 3 3 Add: Average
deferred tax liabilities related to goodwill (GAAP) — —
481 481 — — 468 468
Average tangible common equity C $5,089 $4,790
$3,290 $13,169 $4,831 $4,787 $3,330
$12,948 Return on average tangible common equity B/C
5.59 % 11.19 % NM 6.61 % 5.50 % 12.57 % NM 6.75 %
Return on
average total tangible assets: Average total assets (GAAP)
$55,116 $45,304 $38,360 $138,780 $54,065 $43,835 $38,398 $136,298
Less: Average goodwill (GAAP) — — 6,876 6,876 — — 6,876 6,876
Average other intangibles (GAAP) — — 3 3 — — 3 3 Add: Average
deferred tax liabilities related to goodwill (GAAP) — —
481 481 — — 468 468
Average tangible assets D $55,116 $45,304
$31,962 $132,382 $54,065 $43,835
$31,987 $129,887 Return on average total tangible
assets A/D 0.52 % 1.18 % NM 0.68 % 0.49 % 1.37 % NM 0.67 %
Efficiency ratio: Noninterest expense (GAAP) E $616 $187 $8
$811 $624 $180 $6 $810 Net interest income (GAAP) 581 300 23 904
565 301 4 870 Noninterest income (GAAP) 208 99 23
330 226 107 29 362 Total
revenue (GAAP) F $789 $399 $46 $1,234
$791 $408 $33 $1,232 Efficiency ratio
E/F 78.08 % 46.74 % NM 65.66 % 78.85 % 44.02 % NM 65.76 %
THREE MONTHS ENDED SEPT 30, 2015
ConsumerBanking
CommercialBanking
Other
Consolidated Net income available to common
stockholders: Net income (loss) (GAAP) A $68 $145 $7 $220 Less:
Preferred stock dividends — — 7 7 Net
income available to common stockholders B $68 $145 $—
$213
Return on average tangible common equity:
Average common equity (GAAP) $4,791 $4,722 $9,748 $19,261 Less:
Average goodwill (GAAP) — — 6,876 6,876 Average other intangibles
(GAAP) — — 4 4 Add: Average deferred tax liabilities related to
goodwill (GAAP) — — 453 453 Average
tangible common equity C $4,791 $4,722 $3,321
$12,834 Return on average tangible common equity B/C 5.67 %
12.24 % NM 6.60 %
Return on average total tangible assets:
Average total assets (GAAP) $53,206 $43,113 $38,784 $135,103 Less:
Average goodwill (GAAP) — — 6,876 6,876 Average other intangibles
(GAAP) — — 4 4 Add: Average deferred tax liabilities related to
goodwill (GAAP) — — 453 453 Average
tangible assets D $53,206 $43,113 $32,357
$128,676 Return on average total tangible assets A/D 0.51 %
1.34 % NM 0.68 %
Efficiency ratio: Noninterest expense
(GAAP) E $623 $175 $— $798 Net interest income (GAAP) 556 299 1 856
Noninterest income (GAAP) 235 100 18 353
Total revenue (GAAP) F $791 $399 $19
$1,209 Efficiency ratio E/F 78.72 % 43.75 % NM 66.02 %
Key performance metrics, non-GAAP
financial measures and reconciliations – segments($s in
millions)
FOR THE NINE MONTHS ENDED SEPT 30, 2016 2015
ConsumerBanking
CommercialBanking
Other
Consolidated
ConsumerBanking
CommercialBanking
Other Consolidated Net income available to common
stockholders: Net income (loss) (GAAP) A $253 $459 $51 $763
$195 $427 ($3 ) $619 Less: Preferred stock dividends — —
14 14 — — 7 7 Net income
available to common stockholders B $253 $459 $37 $749
$195 $427 ($10 ) $612
Return on
average tangible common equity: Average common equity (GAAP)
$5,130 $5,001 $9,584 $19,715 $4,708 $4,625 $10,019 $19,352 Less:
Average goodwill (GAAP) — — 6,876 6,876 — — 6,876 6,876 Average
other intangibles (GAAP) — — 2 2 — — 5 5 Add: Average deferred tax
liabilities related to goodwill (GAAP) — — 495 495
— — 438 438 Average tangible
common equity C $5,130 $5,001 $3,201 $13,332
$4,708 $4,625 $3,576 $12,909 Return on
average tangible common equity B/C 6.58 % 12.27 % NM 7.51 % 5.55 %
12.35 % NM 6.34 %
Return on average total tangible assets:
Average total assets (GAAP) $55,825 $46,869 $39,101 $141,795
$52,438 $42,451 $39,766 $134,655 Less: Average goodwill (GAAP) — —
6,876 6,876 — — 6,876 6,876 Average other intangibles (GAAP) — — 2
2 — — 5 5 Add: Average deferred tax liabilities related to goodwill
(GAAP) — — 495 495 — — 438
438 Average tangible assets D $55,825 $46,869
$32,718 $135,412 $52,438 $42,451
$33,323 $128,212 Return on average total tangible
assets A/D 0.60 % 1.31 % NM 0.75 % 0.50 % 1.35 % NM 0.65 %
Efficiency ratio: Noninterest expense (GAAP) E $1,898 $554
$53 $2,505 $1,832 $529 $88 $2,449 Net interest income (GAAP) 1,804
941 27 2,772 1,633 861 38 2,532 Noninterest income (GAAP) 656
344 120 1,120 684 308 68
1,060 Total revenue (GAAP) F $2,460 $1,285
$147 $3,892 $2,317 $1,169 $106 $3,592
Efficiency ratio E/F 77.15 % 43.15 % NM 64.36 % 79.07 %
45.26 % NM 68.17 %
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,” “anticipates,” “estimates,” “intends,”
“plans,” “goals,” “targets,” “initiatives,” “potentially,”
“probably,” “projects,” “outlook” or similar expressions or future
conditional verbs such as “may,” “will,” “should,” “would,” and
“could.”
Forward-looking statements are based upon the current beliefs
and expectations of management, and on information currently
available to management. Our statements speak as of the date
hereof, and we do not assume any obligation to update these
statements or to update the reasons why actual results could differ
from those contained in such statements in light of new information
or future events. We caution you, therefore, against relying on any
of these forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future performance.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, important factors that
could cause actual results to differ, materially, from those in the
forward-looking statements include the following, without
limitation:
- negative economic conditions that
adversely affect the general economy, housing prices, the job
market, consumer confidence and spending habits which may affect,
among other things, the level of nonperforming assets, charge-offs
and provision expense;
- the rate of growth in the economy and
employment levels, as well as general business and economic
conditions;
- our ability to implement our strategic
plan, including the cost savings and efficiency components, and
achieve our indicative performance targets;
- our ability to remedy regulatory
deficiencies and meet supervisory requirements and
expectations;
- liabilities and business restrictions
resulting from litigation and regulatory investigations;
- our capital and liquidity requirements
(including under regulatory capital standards, such as the Basel
III capital standards) and our ability to generate capital
internally or raise capital on favorable terms;
- the effect of the current low interest
rate environment or changes in interest rates on our net interest
income, net interest margin and our mortgage originations, mortgage
servicing rights and mortgages held for sale;
- changes in interest rates and market
liquidity, as well as the magnitude of such changes, which may
reduce interest margins, impact funding sources and affect the
ability to originate and distribute financial products in the
primary and secondary markets;
- the effect of changes in the level of
checking or savings account deposits on our funding costs and net
interest margin;
- financial services reform and other
current, pending or future legislation or regulation that could
have a negative effect on our revenue and businesses, including the
Dodd-Frank Act and other legislation and regulation relating to
bank products and services;
- a failure in or breach of our
operational or security systems or infrastructure, or those of our
third party vendors or other service providers, including as a
result of cyber-attacks; and
- management’s ability to identify and
manage these and other risks.
In addition to the above factors, we also caution that the
amount and timing of any future common stock dividends or share
repurchases will depend on our financial condition, earnings, cash
needs, regulatory constraints, capital requirements (including
requirements of our subsidiaries), and any other factors that our
board of directors deems relevant in making such a determination.
Therefore, there can be no assurance that we will pay any dividends
to holders of our common stock, or as to the amount of any such
dividends.
More information about factors that could cause actual results
to differ materially from those described in the forward-looking
statements can be found under “Risk Factors” in Part I, Item 1A in
our Annual Report on Form 10-K for the year ended December 31,
2015, filed with the United States Securities and Exchange
Commission on February 26, 2016.
Note: Percentage changes, per share amounts and ratios presented
in this document are calculated using whole dollars.
CFG-IR
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161021005332/en/
Citizens Financial Group, Inc.Media:Peter Lucht,
781-655-2289orInvestors:Ellen A. Taylor, 203-900-6854
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