Second quarter 2017 net income up 31% and
diluted EPS up 37% versus year-ago quarter
ROTCE* of 9.6% with 5% positive operating
leverage year over year; 7% Underlying
Citizens Financial Group, Inc. (NYSE: CFG or “Citizens”) today
reported second quarter net income of $318 million, up 31% from
$243 million in second quarter 2016 with earnings per diluted
common share of $0.63, up 37% from $0.46 per diluted common share
in second quarter 2016. Second quarter 2017 net income was
relatively stable with first quarter 2017, which included a $23
million, or $0.04 per share, benefit related to the settlement of
certain state tax matters, and second quarter earnings per diluted
common share increased 3% from $0.61 in first quarter 2017. On an
Underlying basis,* which excludes the benefit of the first quarter
state tax settlement, second quarter net income increased 7% and
earnings per diluted common share increased 11% relative to first
quarter 2017.
Second quarter 2017 results reflect a pre-tax $26 million impact
related to impairments on aircraft lease assets which, in addition
to provision expense of $70 million, resulted in total
credit-related costs of $96 million. The lease impairments, which
largely relate to a non-core runoff portfolio, reduced noninterest
income by $11 million and increased noninterest expense by $15
million. Year-over-year operating leverage was 5%; 7% Underlying
before the impact of the lease impairments.*
Return on Average Tangible Common Equity (“ROTCE”) of 9.6% in
second quarter 2017 compared to 9.7% in first quarter 2017, or 9.0%
on an Underlying basis, and 7.3% in second quarter 2016.*
“We are pleased to report another quarter of strong results,
which reflect continued execution of our strategic initiatives,”
said Chairman and Chief Executive Officer Bruce Van Saun. “We
believe we are turning the corner and emerging from our turnaround
phase, having made strong strides in growing our balance sheet and
customer base and building out our capabilities in both Consumer
and Commercial. We aim to become a top-performing regional bank,
and remain confident in our outlook and ability to deliver strong
earnings growth and capital returns.”
Citizens announced the launch of the next phase of its Tapping
Our Potential (“TOP”) efficiency programs, which are designed to
drive continuous improvement in the overall efficiency and
effectiveness of the organization while self-funding investments to
drive future growth. The new TOP IV program is expected to deliver
pre-tax run-rate expense and revenue enhancements in the range of
$90 million to $105 million by the end of 2018.
Citizens also announced that its board of directors declared a
third quarter cash dividend of $0.18 per common share, an increase
of $0.04 per share, or 29%. The dividend is payable on August 16,
2017 to shareholders of record at the close of business on August
2, 2017.
*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.
“Underlying” results, as applicable, exclude a 1Q17 $23 million
benefit related to the settlement of certain state tax matters and
reclassify 2Q17 results for the pre-tax impact of $26 million of
lease asset impairments to reflect their credit-related impact.
Second Quarter 2017 vs. First Quarter
2017
Key Highlights
- Second quarter highlights include net
interest income growth of 2%, strength in mortgage banking fees,
service charges and fees and capital markets fees along with
continued expense management discipline. Results reflect net
interest margin expansion to 2.97% and an efficiency ratio of
61.9%, or 60.4% before the impact of lease impairments.*
- Tangible book value per common share of
$26.61 increased 2%. Fully diluted average common shares
outstanding decreased by 3.9 million shares.
Results
- Total revenue of $1.4 billion increased
1% with a 2% increase in net interest income, partially offset by a
$9 million decrease in noninterest income, driven by $11 million of
finance lease impairments recorded in other income.
- Net interest income of $1.0 billion
increased $21 million, driven by 1% growth in average loans and
leases, the benefit of day count and net interest margin expansion
to 2.97%.
- Net interest margin of 2.97% reflects
the benefit of higher short-term interest rates and improving loan
mix towards higher-return assets, partially offset by the effects
of lower long-term rates on securities portfolio premium
amortization expense and an increase in funding costs.
- Although noninterest income of $370
million decreased $9 million, it was up modestly before the impact
of finance lease impairments. Results reflect another record
quarter in capital markets revenue, improvement in mortgage banking
fees, seasonally higher service charges and fees and growth in
letter of credit and loan fees, partially offset by modest declines
across several other fee categories.
- Noninterest expense of $864 million
increased $10 million, driven by a $15 million increase tied to
operating lease impairments recorded in other expense. Before the
impact of lease impairments, noninterest expense of $849 million
decreased by $5 million compared with $854 million in first quarter
2017. Results reflect a seasonal reduction in salaries and benefits
expense and a reduction in equipment and occupancy expense,
partially offset by higher outside services and other expense,
including higher FDIC expense, advertising and public relations
costs and travel expense.
- Provision for credit losses of $70
million improved 27%, driven by continued improvement in overall
portfolio credit quality, which more than offset reserves to fund
loan growth. Including the impact of lease residual impairments,
credit-related costs totaled $96 million, flat with first quarter
2017.
- Efficiency ratio of 61.9%, or 60.4%
before the impact of lease impairments, compared with 61.7% in
first quarter 2017; ROTCE of 9.6% compared with 9.7% in first
quarter 2017; 9.0% on an Underlying basis.*
Balance Sheet
- Average interest-earning assets
increased $1.2 billion, or 1%, driven by 1% loan growth. Results
reflect the $124 million average impact of the sale of $596 million
of lower-return commercial loans and leases associated with balance
sheet optimization initiatives. Before the impact of the commercial
loan and lease sales, average loan growth was 1.1% and period-end
loan growth was 1.4%.
- Average deposits increased $836
million, or 1%, reflecting growth in checking with interest, term
and savings.
- Nonperforming loans and leases (“NPLs”)
to total loans and leases ratio of 0.94% improved from 0.97%,
reflecting a reduction in retail NPLs. Allowance coverage of NPLs
improved to 119% from 117%.
- Net charge-offs of 28 basis points
improved from 33 basis points in first quarter 2017, reflecting
continued strong results in core retail and core commercial,
partially offset by an increase in non-core portfolios.
- Robust capital strength with a common
equity tier 1 (“CET1”) risk-based capital ratio of 11.2%.
- Repurchased 3.7 million shares of
common stock in the quarter; as of June 30, 2017, 2016 CCAR Capital
Plan repurchases totaled 24.5 million common shares at a
weighted-average price per share of $28.21. Including common
dividends, capital returned to shareholders was $957 million.
- Received a non-objection to the 2017
CCAR Capital Plan, which includes up to $850 million in share
repurchases and the ability to increase the quarterly dividend to
$0.22 per share in early 2018.
Second Quarter 2017 vs. Second Quarter
2016
Key Highlights
- Second quarter results reflect a 31%
increase in net income available to common stockholders, led by
revenue growth of 9%, as net interest income increased 11% given 6%
average loan growth and a 13 basis point increase in net interest
margin as well as noninterest income growth of 4%. Before the
impact of lease impairments, revenue increased 10% with noninterest
income growth of 7%.*
- Continued strong focus on top-line
growth and expense management helped drive positive operating
leverage of 5%, a 2.8% improvement in the efficiency ratio and a
2.3% improvement in ROTCE.*
- Before the impact of lease impairments,
operating leverage was 7% and the efficiency ratio improved
4.4%.*
- Fully diluted average common shares
outstanding decreased by 23.0 million.
Results
- Total revenue of $1.4 billion increased
$118 million, or 9%, reflecting strong net interest income and
noninterest income growth.
- Net interest income increased 11% given
6% average loan growth and a 13 basis point improvement in net
interest margin.
- Net interest margin of 2.97% reflects
improved loan yields, driven by higher rates and balance sheet
optimization initiatives, partially offset by investment portfolio
growth and higher funding costs.
- Noninterest income increased 4%, as
strength in capital markets fees, card fees, mortgage banking fees
and letter of credit and loan fees was partially offset by the $11
million impact of finance lease impairments. Before the impact of
finance lease impairments, noninterest income was up 7%.*
- Noninterest expense increased 4%,
reflecting higher other expense, driven by the $15 million impact
of operating lease impairments and higher FDIC expense, as well as
an increase in advertising and public relations costs. Results also
reflect stable salaries and employee benefits and equipment
expense, as well as an increase in outside services, occupancy and
amortization of software expense. Before the impact of operating
lease impairments, noninterest expense increased 3%.*
- Provision for credit losses decreased
$20 million, or 22%, reflecting continued improvement in overall
portfolio credit quality that more than offset the impact of an
increase in commercial charge-offs. Total credit-related costs of
$96 million, including lease impairments, were up modestly from
second quarter 2016.
- ROTCE* of 9.6% improved 2.3%, from
7.3%.
Balance Sheet
- Average interest-earning assets
increased $8.1 billion, or 6%, reflecting 6% loan growth and a 7%
increase in the investment portfolio.
- Average deposits increased $6.8
billion, or 7%, on strength in checking with interest, term, money
market and savings.
- NPLs to total loans and leases ratio of
0.94% improved from 1.01%, as a reduction in retail nonperforming
loans more than offset an increase in commercial nonperforming
loans, largely commodities-related credits, partially offset by
improvement in commercial real estate. Allowance coverage of NPLs
of 119% remained relatively stable.
- Net charge-offs of 28 basis points of
loans increased modestly from a relatively low 25 basis points in
second quarter 2016, reflecting continued improvement in retail,
partially offset by an increase in commercial that represents
continued normalization from lower charge-off levels.
Update on Plan Execution
Consumer Banking
- Performance paced by solid loan growth
with continued traction in education, mortgage and unsecured
retail, along with increased loan yields, reflecting improving mix
and higher rates.
- Wealth management business continues to
build scale and add capabilities, with fee income growth of 2% and
managed money fees up 26% from second quarter 2016. Positive trend
continues in migrating sales mix from transaction to fee-based
products.
- Mortgage business continues to
demonstrate strength, with improved secondary mix year-over-year
and strong customer satisfaction scores that reflect the impact of
investments in our platform and talent.
Commercial Banking
- Strong year-over-year performance in
fee income was led by loan syndications, letter of credit and loan
fees and card fees as we continue to benefit from investments in
our growth initiatives.
- Continued balance sheet and customer
growth with 6% average loan growth from second quarter 2016,
reflecting strength in Commercial Real Estate, Mid-corporate and
Middle Market, Franchise Finance and Industry Verticals. In
addition, grew average deposits 14% from second quarter 2016.
Continue to add coverage bankers to expand expertise in industry
groups and to extend geographic reach.
Efficiency and balance sheet
optimization strategies
- TOP III continues to deliver benefits
and is now projected to deliver $110 million in pre-tax revenue and
expense run-rate benefits in 2017, including $20 million of tax
benefits.
- TOP IV initiatives are expected to
deliver $90 million to $105 million of run-rate pre-tax revenue and
expense benefits by the end of 2018 and will help drive continued
positive operating leverage and fund investments for future
growth.
- Initiatives to shift loan portfolio mix
to higher-return categories continue to deliver benefits. Stepped
up efforts in Commercial Banking to exit lower-return relationships
and recycle capital towards new business with greater cross-sell
opportunities.
Earnings highlights 2Q17 change from ($s in millions,
except per share data)
2Q17
1Q17 2Q16
1Q17 2Q16 Earnings
$ % $
% Net interest income $ 1,026 $ 1,005 $ 923 $ 21 2 %
$ 103 11 % Noninterest income 370 379 355 (9 ) (2 ) 15 4 Total
revenue 1,396 1,384 1,278 12 1 118 9 Noninterest expense 864 854
827 10 1 37 4 Pre-provision profit 532 530 451 2 0 81 18 Provision
for credit losses 70
96 90 (26 ) (27 )
(20 ) (22 ) Net income 318 320 243 (2 ) (1 ) 75 31 Preferred
dividends
-
7
-
(7 ) (100 )
-
-
Net income available to common stockholders
318 313
243 5 2 75 31
Average common
shares outstanding Basic (in millions) 506.4 509.5 529.0 (3.1 )
(1 ) % (22.6 ) (4 ) % Diluted (in millions) 507.4 511.3 530.4 (3.9
) (1 ) (23.0 ) (4 ) Diluted earnings per share
$ 0.63 $ 0.61 $ 0.46 $
0.02 3 % $ 0.17 37 %
Key performance metrics*
Net interest margin 2.97 % 2.96 % 2.84 % 1 bps 13 bps Effective
income tax rate 31.1 26.4 32.6 477 (148 ) Efficiency ratio 62 62 65
26 (277 ) Return on average common equity 6.5 6.5 4.9 (4 ) 154
Return on average tangible common equity 9.6 9.7 7.3 (11 ) 227
Return on average total assets 0.85 0.87 0.69 (2 ) 16 Return on
average total tangible assets 0.89 %
0.91 % 0.72 % (2 ) bps 17
bps
Capital adequacy(1,2) Common equity tier 1 capital ratio
11.2 % 11.2 % 11.5 % Total capital ratio 14.0 14.0 14.9 Tier 1
leverage ratio 9.9 %
9.9 % 10.3 %
Asset
quality(2) Total nonperforming loans and leases as a %
of total loans and leases 0.94 % 0.97 % 1.01 % (3 ) bps (7 ) bps
Allowance for loan and lease losses as a % of loans and leases 1.12
1.13 1.20 (1 ) (8 ) Allowance for loan and lease losses as a % of
nonperforming loans and leases 119 117 119 238 (29 ) Net
charge-offs as a % of average loans and leases
0.28 % 0.33 % 0.25
% (5 ) bps 3 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:
Second quarter 2017 results reflect a pre-tax $26 million impact
related to impairments on aircraft lease assets which, in addition
to provision expense of $70 million, resulted in total
credit-related costs of $96 million, detailed in the table
below.
Lease
2Q17 Underlying* change from
2Q17 Underlying results* Reported impairment
Underlying* Underlying* Reported ($s in
millions)
2Q17 impact
2Q17 1Q17 2Q16 Net interest income $
1,026 $ — $ 1,026 2 % 11 % Noninterest income
370 11 381 1 7 Total
revenue 1,396 11 1,407 2 10 Noninterest expense
$ 864 $ (15 ) $ 849 (1 ) 3 Pre-provision profit $ 532
$ 26 $ 558 5 24 Provision for credit losses $ 70 $ — $ 70 (27 ) (22
) Lease impairment credit-related costs
— 26 26 NM NM Total
credit-related costs* $ 70 $ 26 $ 96 —
7 Net income $ 318 $ — $ 318 7 % 31 %
Key
performance metrics*
Diluted EPS $ 0.63 $ — $ 0.63 11 % 37 % Efficiency
ratio 62 % (158 ) bps 60 % (132 ) bps (435 ) bps Operating leverage
2.3 % 7.4 %
Second quarter 2017 net income available to common stockholders
of $318 million was relatively stable with first quarter 2017,
which included a $23 million, or $0.04 per share, benefit related
to the settlement of certain state tax matters. Diluted EPS of
$0.63 increased $0.02, or 3%, from first quarter 2017. On an
Underlying basis,* second quarter net income increased 7% and
earnings per diluted common share increased 11% relative to first
quarter 2017. Second quarter 2017 results reflect a pre-tax $26
million impact related to impairments on aircraft lease assets. The
lease impairments reduced second quarter noninterest income by $11
million and increased noninterest expense by $15 million. Second
quarter 2017 EPS reflects a 3.9 million reduction in fully diluted
average common shares outstanding from first quarter 2017.
Compared with second quarter 2016 levels, net income available
to common stockholders increased $75 million, or 31%, driven by 7%
Underlying positive operating leverage, as strong revenue growth
and disciplined expense management drove 24% growth in Underlying
pre-provision profit.* Diluted EPS of $0.63 increased $0.17, or
37%, reflecting 31% net income growth and a 23.0 million reduction
in fully diluted average common shares outstanding from second
quarter 2016.
Net interest income 2Q17 change from ($s in millions)
2Q17 1Q17
2Q16 1Q17
2Q16 $ % $
% Interest income:
Interest and fees on loans and leases and
loans held for sale $ 1,046 $ 997 $ 903 $ 49 5 % $ 143 16 %
Investment securities 154 160 141 (6 ) (4 ) 13 9 Interest-bearing
deposits in banks 5
3 2 2 67
3 150 Total interest income $
1,205 $ 1,160 $ 1,046 $
45 4 % $ 159 15 %
Interest expense: Deposits
102 86 63 16 19 % 39 62 % Federal funds purchased and securities
sold under agreements to repurchase — 1 — (1 ) (100 ) — NM Other
short-term borrowed funds 7 8 12 (1 ) (13 ) (5 ) (42 ) Long-term
borrowed funds 70
60 48 10 17
22 46 Total interest expense $ 179
$ 155 $ 123 $ 24
15 % $ 56 46 % Net interest income $
1,026 $ 1,005 $ 923 $ 21
2 % $ 103 11 % Net interest margin
2.97 % 2.96 % 2.84
%
1 bps 13 bps
Net interest income of $1.0 billion increased $21 million, or
2%, from first quarter 2017, given a 1% increase in average loans
and leases, the benefit of day count and net interest margin
expansion to 2.97%. The improvement in net interest margin reflects
the benefit of higher short-term interest rates and higher
interest-earning asset yields with improving loan mix toward
higher-return categories, partially offset by higher deposit and
funding costs and the effects of declining long-term rates on
securities portfolio premium-amortization expense.
Compared to second quarter 2016, net interest income increased
$103 million, or 11%, reflecting 6% average loan growth and a 13
basis point improvement in net interest margin. The improvement in
net interest margin reflects higher commercial and consumer loan
yields given higher interest rates and balance sheet optimization
initiatives, partially offset by higher deposit and funding costs
and the impact of growth in the securities portfolio.
Noninterest Income 2Q17 change
from ($s in millions)
2Q17
1Q17 2Q16
1Q17 2Q16 $
% $ % Service
charges and fees $ 129 $ 125 $ 130 $ 4 3 % $
(1 ) (1 ) % Card fees 59 60 51 (1 ) (2 ) 8 16
Capital markets fees 51 48 38 3 6 13 34 Trust and investment
services fees 39 39 38 — — 1 3 Letter of credit and loan fees 31 29
28 2 7 3 11 Foreign exchange and interest rate products 26 27 26 (1
) (4 ) — — Mortgage banking fees 30 23 25 7 30 5 20 Securities
gains, net 3 4 4 (1 ) (25 ) (1 ) (25 ) Other income(1)
2 24
15 (22 ) (92 ) (13 ) (87 ) Noninterest
income $ 370 $ 379
$ 355 $ (9 ) (2 ) % $ 15 4 %
1) Other income includes bank-owned life insurance and other
income.
Noninterest income of $370 million decreased $9 million from
first quarter 2017 and included an $11 million impact related to
finance lease impairments recorded in other income. Underlying
noninterest income of $381 million increased modestly from first
quarter 2017.* Results reflect another record quarter in capital
markets fees, improvement in mortgage banking fees, seasonally
higher service charges and fees and growth in letter of credit and
loan fees, partially offset by modest declines across other fee
categories. Service charges and fees increased $4 million, largely
reflecting seasonality. Card fees remained relatively stable with
first quarter levels that included lower card reward expense, given
seasonally higher purchase volume and out-of-network ATM fees.
Capital markets fees increased $3 million, driven by strong results
in loan syndications. Trust and investment services fees were
stable as the benefit of an increase in investment sales was offset
by a shift in sales mix and lower transaction sales margins.
Foreign exchange and interest rate products income remained
relatively stable. Mortgage banking fees increased $7 million,
reflecting higher origination volumes and higher loan sale gains.
Securities gains of $3 million offset the impact of a securities
portfolio other-than-temporary-impairment charge of $3 million in
other income tied to a model update.
Noninterest income increased $15 million, or 4%, from second
quarter 2016 levels. Excluding the $11 million impact of finance
lease impairments recorded in other income, Underlying* noninterest
income of $381 million increased 7% from second quarter 2016.
Results reflect strength in capital markets fees, card fees and
mortgage banking fees. Card fees increased $8 million, reflecting
the benefit of revised contract terms for processing fees and an
increase in purchase volume. Capital markets fees increased $13
million, reflecting strength in loan syndications, given strong
market volumes and the investments made to broaden our
capabilities. Trust and investment services fees remained
relatively stable as growth in managed money assets and an increase
in investment sales was offset by the impact of a shift in
transaction sales mix. Mortgage banking fees increased $5 million,
driven by an increase in production fees.
Noninterest expense 2Q17 change
from ($s in millions)
2Q17
1Q17 2Q16
1Q17 2Q16 $ % $
% Salaries and employee benefits $ 432 $ 444 $ 432 $ (12 )
(3 ) % $ — — % Outside services 96 91 86 5 5 10 12 Occupancy 79 82
76 (3 ) (4 ) 3 4 Equipment expense 64 67 64 (3 ) (4 ) — —
Amortization of software 45 44 41 1 2 4 10 Other operating expense
148 126
128 22 17 20 16
Noninterest expense $ 864
$ 854 $ 827 $ 10 1 % $ 37 4 %
Noninterest expense of $864 million increased $10 million,
driven by a $15 million impact related to operating lease
impairments included in other operating expense. Underlying*
noninterest expense of $849 million decreased from $854 million in
first quarter 2017. Salaries and employee benefits expense
decreased $12 million, reflecting a seasonal decrease in payroll
taxes and 401(k) benefit costs. Outside services expense increased
$5 million, largely reflecting an increase in consumer loan
origination and servicing costs. Occupancy expense decreased $3
million from higher first quarter levels that included higher costs
associated with our branch rationalization efforts and seasonally
higher maintenance costs. Other expenses increased $22 million,
reflecting the impact of the $15 million operating lease
impairments, higher FDIC expense, advertising and public relations
costs and travel expense, partially offset by lower credit
collection costs.
Compared with second quarter 2016, noninterest expense increased
$37 million, or 4%, driven by the $15 million impact related to
operating lease impairments. Underlying* noninterest expense
increased 3% from second quarter 2016. Results reflect stable
salaries and employee benefits, as a reduction tied to the change
in timing of incentive payments offset the impact of our growth
initiatives. Results also reflect higher outside services,
amortization of software, occupancy and FDIC expense and
advertising and public relations costs, partially offset by lower
credit collection costs. Outside services increased $10 million,
reflecting an increase in consumer loan origination and servicing
costs and the impact of our efficiency initiatives. Occupancy
expense increased $3 million, reflecting an increase in costs
associated with branch rationalization and maintenance.
Amortization of software expense increased $4 million, reflecting
the impact of technology investments. Other expense increased $20
million, reflecting the impact of lease impairments, higher FDIC
expense, advertising and public relations costs, partially offset
by lower credit collection costs.
The effective tax rate for second quarter 2017 was 31.1%, which
reflects an increase in historic tax credits and a modest benefit
from the early payoff of a sale-in and lease-out (“SILO”)
transaction. The first quarter 2017 tax rate was 26.4%, or 31.6%,
on an Underlying basis,* which excludes the 5.2% benefit related to
the settlement of certain state tax matters. The second quarter
2016 tax rate was 32.6%.
Consolidated balance sheet review(1)
2Q17 change from
($s in millions)
2Q17
1Q17 2Q16 1Q17
2Q16 $
% $ % Total assets $
151,407 $ 150,285 $ 145,183 $ 1,122 1 % $ 6,224
4 % Loans and leases and loans held for sale
109,753 108,780 104,401 973 1 5,352 5 Deposits 113,613 112,112
106,257 1,501 1 7,356 7 Average interest-earning assets (quarterly)
137,587 136,410 129,492 1,177 1 8,095 6 Stockholders' equity 20,064
19,847 20,226 217 1 (162 ) (1 ) Stockholders' common equity 19,817
19,600 19,979 217 1 (162 ) (1 ) Tangible common equity $ 13,463 $
13,258 $ 13,608 $ 205 2 % $ (145 ) (1 ) % Loan-to-deposit ratio
(period-end)(2) 96.6 % 97.0 % 98.3 % (43 ) bps (165 ) bps Loans to
deposits ratio (avg balances) (2) 99.1 98.8 99.5 27 bps (44 ) bps
Common equity tier 1 capital ratio(3) 11.2 11.2 11.5 Total capital
ratio(3) 14.0 %
14.0 % 14.9 %
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 $151.4 billion increased $1.1 billion, or 1%,
from March 31, 2017, driven by a $1.0 billion increase in loans and
leases and loans held for sale. Compared with June 30, 2016, total
assets increased $6.2 billion, or 4%, driven by a $5.4 billion
increase in loans and leases and loans held for sale, as well as a
$1.0 billion increase in investment portfolio assets, partially
offset by a $135 million reduction in other non-earning assets.
Average interest-earning assets of $137.6 billion in second
quarter 2017 increased $1.2 billion, or 1%, from the prior quarter,
driven by a $620 million increase in retail loans, a $455 million
increase in commercial loans and leases, including a $124 million
impact tied to the sale of lower-return commercial loans and
leases, and a $59 million increase in investment portfolio assets.
Compared to second quarter 2016, average interest-earning assets
increased $8.1 billion, or 6%, driven by commercial loan growth of
$3.4 billion, retail loan growth of $3.1 billion and a $1.8 billion
increase in investment portfolio assets, including a $1.7 billion
increase in securities and a $133 million increase in
interest-bearing cash.
Interest-earning assets 2Q17 change
from ($s in millions)
2Q17
1Q17 2Q16
1Q17 2Q16 Period-end
interest-earning assets $ %
$ % Investments and interest-bearing
deposits $ 28,811 $ 29,458 $ 27,804 $ (647 ) (2 ) % $
1,007 4 % Commercial loans and leases 51,888 51,892
49,557 (4 ) — 2,331 5 Retail loans 57,158 56,219 53,994 939 2 3,164
6 Total loans and leases 109,046 108,111 103,551 935 1 5,495 5
Loans held for sale, at fair value 520 448 478 72 16 42 9 Other
loans held for sale 187 221 372 (34 ) (15 ) (185 ) (50 ) Total
loans and leases and loans held for sale
109,753 108,780
104,401 973 1 5,352 5
Total period-end interest-earning assets $
138,564 $ 138,238 $
132,205 $ 326 0 % $ 6,359 5 %
Average
interest-earning assets Investments and interest-bearing
deposits $ 27,820 $ 27,761 $ 26,007 $ 59 0 % $ 1,813 7 % Commercial
loans and leases 52,489 52,034 49,134 455 1 3,355 7 Retail loans
56,651 56,031 53,543 620 1 3,108 6 Total loans and leases 109,140
108,065 102,677 1,075 1 6,463 6 Loans held for sale, at fair value
465 510 368 (45 ) (9 ) 97 26 Other loans held for sale 162 74 440
88 119 (278 ) (63 ) Total loans and leases and loans held for sale
109,767
108,649 103,485 1,118 1
6,282 6 Total average interest-earning assets
$ 137,587 $ 136,410
$ 129,492 $ 1,177 1 % $ 8,095 6 %
Period-end investments and interest-bearing deposits of $28.8
billion as of June 30, 2017 decreased $647 million, or 2%, compared
with March 31, 2017, reflecting an $881 million decrease in
securities and a $234 million increase in cash positions. Compared
with June 30, 2016, investments and interest-bearing deposits
increased $1.0 billion, or 4%, including a $717 million increase in
securities and a $290 million increase in cash and equivalents. At
the end of second quarter 2017, the average effective duration of
the securities portfolio decreased to 4.0 years compared with 4.4
years at March 31, 2017, given lower long-term rates that drove an
increase in securities prepayment speeds. Securities portfolio
duration was 2.4 years at June 30, 2016, reflecting higher
long-term rates at that time, which reduced securities prepayment
speeds.
Period-end loans and leases of $109.0 billion at June 30, 2017
increased $935 million, or 1%, from $108.1 billion at March 31,
2017, driven by a $939 million increase in retail loans. Commercial
loans and leases were relatively stable, reflecting the impact of
the sale of $596 million of lower-return commercial loans and
leases associated with balance sheet optimization initiatives.
Period-end loan growth was 1.4% before the impact of these sales.
Compared to June 30, 2016, period-end loans and leases increased
$5.5 billion, or 5%, from $103.6 billion, reflecting a $3.2 billion
increase in retail loans and a $2.3 billion increase in commercial
loans and leases.
Average loans and leases increased $1.1 billion, or 1%, from
first quarter 2017, reflecting a $620 million increase in retail
loans and a $455 million increase in commercial loans and leases.
Average loan growth was 1.1% before the $124 million average impact
of the balance sheet optimization commercial loan and lease sales.
Commercial loan and lease growth was largely driven by strength in
Commercial Real Estate, Middle Market and Franchise Finance. Retail
loan growth reflects strength in education, mortgage and other
unsecured retail loans, partially offset by lower home equity and
auto balances.
Compared with second quarter 2016, average loans and leases
increased $6.5 billion, or 6%, reflecting a $3.4 billion increase
in commercial loans and leases and a $3.1 billion increase in
retail loans. Commercial loan and lease growth was driven by
strength in Commercial Real Estate, Franchise Finance,
Mid-corporate and Industry Verticals and Middle Market. Retail loan
growth was driven by mortgage, education and other unsecured
retail, partially offset by lower home equity and auto
balances.
Deposits 2Q17 change from ($s in
millions)
2Q17
1Q17 2Q16 1Q17
2Q16 Period-end deposits $
% $
% Demand deposits $ 27,814 $ 27,713 $ 27,108 $ 101
— % $ 706 3 % Checking with
interest 22,497 21,913 19,838 584 3 2,659 13 Savings 9,542 9,441
8,841 101 1 701 8 Money market accounts 38,275 37,833 37,503 442 1
772 2 Term deposits 15,485
15,212 12,967
273 2 2,518 19 Total period-end deposits
$ 113,613 $ 112,112
$ 106,257 $ 1,501 1 % $ 7,356 7 %
Average deposits Demand deposits $ 27,521 $ 28,098 $ 27,448
$ (577 ) (2 ) % $ 73 0 % Checking with interest 21,751 20,699
19,003 1,052 5 2,748 14 Savings 9,458 9,110 8,762 348 4 696 8 Money
market accounts 36,912 37,874 36,187 (962 ) (3 ) 725 2 Term
deposits 15,148
14,173 12,581 975
7 2,567 20 Total average deposits $
110,790 $ 109,954 $
103,981 $ 836 1 % $ 6,809 7 %
Total period-end deposits of $113.6 billion at June 30, 2017
increased $1.5 billion, or 1.0%, from March 31, 2017. Compared with
June 30, 2016, period-end total deposits increased $7.4 billion, or
7%, reflecting growth in all categories with particular strength in
checking with interest, term deposits and money market
accounts.
Second quarter 2017 average deposits of $110.8 billion increased
$836 million, or 1%, from first quarter 2017, reflecting strong
growth in checking with interest and term and savings deposits,
partially offset by a reduction in money market accounts and demand
deposits. Compared with second quarter 2016, average deposits
increased $6.8 billion, or 7%, reflecting growth in all categories
with particular strength in checking with interest and term
deposits.
Borrowed funds
2Q17 change from
($s in millions)
2Q17
1Q17 2Q16 1Q17
2Q16 Period-end borrowed funds
$ % $
% Federal funds purchased and securities sold under
agreements to repurchase $ 429 $ 1,093 $ 717 $ (664 )
(61 ) % $ (288 ) (40 ) % Other
short-term borrowed funds 2,004 2,762 2,770 (758 ) (27 ) (766 ) (28
) Long-term borrowed funds 13,154
11,780
11,810 1,374 12 1,344 11 Total borrowed
funds $ 15,587 $ 15,635
$ 15,297 $ (48 ) — % $ 290 2 %
Average borrowed funds $ 16,730
$ 16,257 $ 15,038 $ 473 3 % $
1,692 11 %
Total borrowed funds of $15.6 billion at June 30, 2017 decreased
$48 million from March 31, 2017, reflecting a $1.4 billion increase
in long-term borrowings, which was more than offset by a $758
million decrease in other short-term borrowings, primarily Federal
Home Loan Bank (“FHLB”) advances and a $664 million decrease in
federal funds purchased and securities sold under agreements to
repurchase. Compared with June 30, 2016, total borrowed funds
increased $290 million, reflecting a $1.3 billion net increase in
long-term borrowings, partially offset by a $766 million decrease
in other short-term borrowings, primarily FHLB and a $288 million
decline in securities sold under agreements to repurchase.
Average borrowed funds of $16.7 billion increased $473 million
from first quarter 2017 as a $1.2 billion increase in long-term
borrowed funds was partially offset by a $762 million reduction in
short-term borrowed funds, largely FHLB advances. Compared with
second quarter 2016, average borrowed funds increased $1.7 billion,
as a $3.3 billion increase in long-term borrowed funds was
partially offset by a $1.6 billion reduction in short-term borrowed
funds, largely FHLB advances.
Capital 2Q17 change from ($s and shares in millions)
2Q17 1Q17
2Q16 1Q17 2Q16
Period-end capital $ %
$ % Stockholders' equity $
20,064 $ 19,847 $ 20,226 $ 217 1 % $ (162 ) (1 ) % Stockholders'
common equity 19,817 19,600 19,979 217 1 (162 ) (1 ) Tangible
common equity 13,463 13,258 13,608 205 2 (145 ) (1 ) Tangible book
value per common share $ 26.61 $ 26.02 $ 25.72 $ 0.59 2 $ 0.89 3
Common shares - at end of period 505.9 509.5 529.1 (3.6 ) (1 )
(23.2 ) (4 ) Common shares - average (diluted) 507.4 511.3 530.4
(3.9 ) (1 ) % (23.0 ) (4 ) % Common equity tier 1 capital
ratio(1,2) 11.2 % 11.2 % 11.5 % Total capital ratio(1,2) 14.0 14.0
14.9 Tier 1 leverage ratio(1,2) 9.9 %
9.9 % 10.3 %
1) Current reporting-period regulatory capital ratios are
preliminary2) Basel III ratios assume that certain definitions
impacting qualifying Basel III capital will phase in through
2019.
On June 30, 2017, our Basel III capital ratios on a transitional
basis remained well in excess of applicable regulatory requirements
with a CET1 capital ratio of 11.2% and a total capital ratio of
14.0%. 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. Tangible book value per common share of $26.61 increased
2% versus first quarter 2017 and 3% versus second quarter 2016.
As part of CFG’s 2016 Capital Plan (the “Plan”), during second
quarter 2017 the company repurchased 3.7 million shares of common
stock and including common dividends, returned $201 million to
shareholders. During the Plan period, CFG completed repurchases of
24.5 million common shares at a weighted-average price per share of
$28.21. In accordance with the Plan, the company paid quarterly
dividends of $0.12 per common share in the third and fourth
quarters of 2016 and $0.14 per common share in the first and second
quarters of 2017. During the Plan period, CFG returned $957 million
to shareholders, including $690 million in common share repurchases
and $267 million in common dividends, representing a payout ratio
of 80%.
CFG’s 2017 Capital Plan, beginning in third quarter 2017 and
ending in second quarter 2018, includes the ability to repurchase
up to $850 million shares of Citizens’ outstanding common stock, a
23% increase compared to the 2016 Capital Plan, and proposed
quarterly dividends of $0.18 per share beginning in third quarter
2017, a 29% increase compared to second quarter 2017. CFG’s 2017
Capital Plan also anticipates the potential to raise quarterly
dividends an additional 22%, to $0.22 per share beginning in early
2018. Future capital actions are subject to consideration and
approval by CFG’s Board of Directors.
Credit quality review 2Q17 change from ($s in
millions)
2Q17
1Q17 2Q16 1Q17
2Q16 $ % $
% Nonperforming loans and leases $ 1,025 $
1,050 $ 1,044 $ (25 ) (2 ) % $ (19 ) (2 ) % Net charge-offs 75 87
65 (12 ) (14 ) 10 15 Provision for credit losses 70 96 90 (26 ) (27
) (20 ) (22 ) Allowance for loan and lease losses $ 1,219 $ 1,224 $
1,246 $ (5 ) — % $ 27 2 % Total nonperforming loans and leases
as a % of total loans and leases
0.94 % 0.97 % 1.01 % (3 ) bps (7 ) bps Net charge-offs as % of
total loans and leases 0.28 0.33 0.25 (5 ) bps 3 bps Allowance for
loan and lease losses as a % of total loans and leases 1.12 % 1.13
% 1.20 % (1 ) bps (8 ) bps Allowance for loan and lease losses as a
% of nonperforming loans and leases
118.98 % 116.60 % 119.27
% 238 bps (29 ) bps
Overall credit quality continued to improve, reflecting growth
in higher quality, lower risk retail loans and broadly stable risk
appetite in commercial categories. Nonperforming loans of $1.0
billion decreased $25 million from March 31, 2017, reflecting
continued improvement in retail real-estate secured categories and
relatively stable results in commercial. Compared to June 30, 2016,
nonperforming loans and leases decreased $19 million as an $86
million decrease in retail, largely real-estate secured categories,
was partially offset by a $67 million increase in commercial,
driven by growth in commodities-related credits, partially offset
by improvement in commercial real estate. The nonperforming loans
and leases to total loans and leases ratio of 0.94% at June 30,
2017 improved modestly from March 31, 2017 levels and improved 7
basis points from 1.01% at June 30, 2016.
Net charge-offs of $75 million decreased $12 million from first
quarter 2017, driven by a $7 million reduction in retail net
charge-offs and a $5 million reduction in commercial net
charge-offs. Compared with second quarter 2016, net charge-offs
increased $10 million from relatively low second quarter 2016
levels, reflecting an increase in commercial net charge-offs,
largely driven by an increase in commodities-related credits.
Second quarter 2017 net charge-offs of 28 basis points of average
loans and leases compares with 33 basis points in first quarter
2017 and 25 basis points in second quarter 2016.
Allowance for loan and lease losses of $1.2 billion decreased
slightly compared to first quarter 2017 and decreased modestly from
second quarter 2016 levels, reflecting continued improvement in
credit quality that helped offset reserves to fund loan growth.
Allowance for loan and lease losses to total loans and leases
was 1.12% as of June 30, 2017, relatively stable compared with
1.13% as of March 31, 2017 and down modestly from 1.20% as of June
30, 2016. The allowance for loan and lease losses to nonperforming
loans and leases ratio of 119% as of June 30, 2017 increased
modestly compared to 117% as of March 31, 2017 and was stable with
June 30, 2016.
Additional Segment Detail:
Consumer Banking Segment 2Q17 change from ($s in
millions)
2Q17
1Q17 2Q16 1Q17
2Q16 $ % $
% Net interest income $ 657 $ 638 $ 602 $ 19 3
% $ 55 9 % Noninterest income 229
220 219
9 4 10 5 Total revenue 886 858 821 28 3
65 8 Noninterest expense 644
647 632 (3
) — 12 2 Pre-provision profit 242 211 189 31 15 53 28
Provision for credit losses 60
64 49 (4 )
(6 ) 11 22 Income before income tax expense 182 147
140 35 24 42 30 Income tax expense 64
52 50
12 23 14 28 Net income
$ 118 $ 95 $ 90 $
23 24 % $ 28 31 % Average balances
Total loans and leases (1) $ 57,922 $
57,309 $ 54,353 $ 613 1 % $ 3,569 7 % Total deposits
$ 75,107 $ 74,133
$ 71,863 $ 974 1 % $ 3,244 5 % Key performance
metrics*
ROTCE (2) 8.6 % 7.1 % 7.1 % 151 bps 148 bps Efficiency ratio 73 %
75 % 77 % (277 ) bps (434 ) bps Loan-to-deposit ratio
(period-end)(1) 77.2 % 75.7 %
76.1 % 150 bps 111 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 $118 million in second quarter
2017 increased $23 million, or 24%, from first quarter 2017, driven
by higher revenue, lower expenses and lower net charge-offs. Net
interest income increased $19 million, or 3%, versus first quarter
2017, reflecting improved loan yields as well as higher education,
mortgage and other unsecured retail loan balances and higher day
count, partially offset by increased deposit costs. Noninterest
income increased $9 million, reflecting an increase in mortgage
banking fees, which were driven by higher origination volumes and
higher loan sale gains, as well as seasonally higher service
charges and fees. Second quarter card fees remained relatively
stable with first quarter levels that included lower card reward
expense, given seasonally higher purchase volumes and
out-of-network ATM fees.
Noninterest expense decreased $3 million from first quarter
2017. Seasonally lower salaries and benefits and a reduction in
occupancy expense from first quarter levels that included higher
branch rationalization costs were partially offset by higher
outside services expense.
Provision for credit losses decreased $4 million from first
quarter 2017, largely driven by lower net charge-offs tied to
seasonal decreases in auto and deposit accounts, partially offset
by higher net charge-offs in consumer unsecured and home
equity.
Compared with second quarter 2016, net income increased $28
million, or 31%, reflecting a $65 million increase in total revenue
relative to a $12 million increase in noninterest expense. Net
interest income increased $55 million, or 9%, driven by a $3.6
billion increase in average loans led by mortgage, education and
consumer unsecured with higher loan yields that included the
benefit of mix shift and higher rates, partially offset by an
increase in deposit costs. Noninterest income increased $10 million
from second quarter 2016, driven by higher card fees, which reflect
the benefit of revised contract terms for processing fees and an
increase in purchase volumes, along with higher mortgage banking
fees, which reflect an increase in production fees, and higher
wealth fees, partially offset by lower service charges and
fees.
Compared to second quarter 2016, noninterest expense increased
$12 million, or 2%, reflecting higher outside services, FDIC
expense, software amortization and advertising expense as well as
increased occupancy costs related to branch rationalization. These
results were partially offset by a decrease in salaries and
benefits, largely reflecting a change in the timing of incentive
payments, as well as lower credit collection costs and fraud
expense.
Provision for credit losses increased $11 million from second
quarter 2016, primarily driven by higher net charge-offs in auto
and consumer unsecured.
Commercial Banking Segment
2Q17 change from ($s in
millions)
2Q17
1Q17 2Q16 1Q17
2Q16 $ %
$ % Net interest income $ 344 $
346 $ 314 $ (2 ) (1 ) % $ 30
10 % Noninterest income 130
134 122
(4 ) (3 ) 8 7 Total revenue 474 480 436
(6 ) (1 ) 38 9 Noninterest expense 192
190 186
2 1 6 3 Pre-provision profit 282
290 250 (8 ) (3 ) 32 13 Provision for credit losses
1 19
(1 ) (18 ) (95 ) 2 200 Income before
income tax expense 281 271 251 10 4 30 12 Income tax expense
94 91
87 3 3 7 8
Net income $ 187 $ 180
$ 164 $ 7 4 % $ 23 14 %
Average balances
Total loans
and leases (1) $ 48,772 $ 48,154 $ 46,073 $ 618 1 % $ 2,699 6 %
Total deposits $ 28,744 $
28,973 $ 25,113 $ (229 ) (1 ) % $ 3,631
14 % Key performance metrics*
ROTCE (2) 13.4 % 13.2 % 13.0 %
19 bps 33 bps Efficiency ratio 40 % 40 % 43 % 68 bps (240 ) bps
Loan-to-deposit ratio (period-end)(1)
158.4 % 165.1 % 172.7 % (670 ) bps
(1,426 ) 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 $187 million in second quarter
2017 increased $7 million, or 4%, from first quarter 2017, as a
reduction in total revenue, driven by a $4 million impact of a
finance lease impairment, was more than offset by an $18 million
reduction in provision for credit losses, reflecting the impact of
lower net charge-offs. Net interest income of $344 million
decreased modestly as the benefit of higher loan balances and
yields was more than offset by an increase in deposit costs.
Average loans and leases increased $618 million, driven by growth
in Commercial Real Estate, Middle Market and Franchise Finance.
Second quarter 2017 results include the $122 million average impact
of the sale of $512 million of lower-return loan and leases related
to balance sheet optimization efforts.
Noninterest income declined $4 million from first quarter 2017,
given the impact of the finance lease impairment. Capital markets
and letter of credit and loan fees were strong. Noninterest expense
remained relatively stable with first quarter 2017, as higher
advertising, outside services and FDIC expense were partially
offset by seasonally lower salaries and benefits expense. Provision
for credit losses decreased $18 million, driven by lower net
charge-offs.
Compared with second quarter 2016, net income increased $23
million, or 14%, driven by a $38 million increase in total revenue,
partially offset by a $6 million increase in noninterest expense
and a $2 million increase in provision for credit losses from
second quarter 2016 levels. Net interest income increased $30
million, or 10%, driven by 6% average loan growth and improved loan
yields, partially offset by higher deposit costs. Average loans and
leases increased $2.7 billion, driven by growth in Commercial Real
Estate, Franchise Finance, Mid-corporate and Industry Verticals and
Middle Market, partially offset by the impact of the third quarter
2016 transfer of loans and leases to non-core.
Compared with second quarter 2016, noninterest income increased
$8 million, reflecting strength in capital markets, letter of
credit and loan fees as well as card fees, partially offset by the
$4 million impact of the lease impairments. Noninterest expense
increased $6 million, reflecting higher FDIC expense and higher
outside services, software amortization and equipment expense.
Results also reflect stable salaries and employee benefits as a
reduction tied to a change in timing of incentive payments offset
higher compensation expense and the impact of growth initiatives.
Provision for credit losses increased $2 million.
Other(1) 2Q17 change from
($s in millions)
2Q17
1Q17 2Q16 1Q17
2Q16 $ % $
% Net interest income $ 25 $ 21 $ 7 $ 4 19 % $
18 NM Noninterest income 11
25
14 (14 ) (56 ) (3 ) (21 ) Total revenue 36 46
21 (10 ) (22 ) 15 71 Noninterest expense
28 17
9 11 65 19
211 Pre-provision profit (loss) 8 29 12 (21 ) (72 ) (4 ) (33 )
Provision for credit losses 9
13
42 (4 ) (31 ) (33 ) (79 ) Income (loss) before
income tax expense (benefit) (1 ) 16 (30 ) (17 ) (106 ) 29 97
Income tax expense (benefit) (14 )
(29 ) (19 )
15 52 5 26 Net income (loss)
$ 13 $ 45
$ (11 ) $ (32 ) (71 ) % $ 24 218 %
Average balances
Total loans and
leases (2) $ 3,073 $ 3,186 $ 3,059 $ (113 ) (4 ) % $ 14 0 % Total
deposits $ 6,939 $
6,848 $ 7,005 $ 91 1 % $
(66 ) (1 ) %
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,
capital, revenues, provision for credit losses and expenses not
attributed to our Consumer Banking or Commercial Banking
segments.2) Includes held for sale.
Other net income of $13 million in second quarter 2017 decreased
$32 million from first quarter 2017, which included a $23 million
benefit related to the settlement of certain state tax matters. Net
interest income increased $4 million, driven by higher residual
funds transfer pricing, partially offset by higher funding
costs.
Second quarter 2017 noninterest income of $11 million decreased
$14 million from first quarter 2017, driven by the $7 million
impact of finance lease impairments. Noninterest expense of $28
million increased $11 million, driven by the $15 million increase
tied to operating lease impairments. Provision for credit losses of
$9 million decreased $4 million, reflecting a reserve release
versus a first quarter reserve build, partially offset by higher
net charge-offs in the non-core portfolio.
Other net income in second quarter 2017 increased $24 million
from second quarter 2016. Net interest income increased $18
million, driven by higher residual funds transfer pricing and
higher investment portfolio income, partially offset by higher
funding costs. Noninterest income decreased $3 million, due to the
impact of the finance lease impairments. Noninterest expense
increased $19 million, driven by the impact of the operating lease
impairments. Provision for credit losses decreased $33 million,
reflecting a second quarter 2017 reserve release compared to a
reserve build in second quarter 2016 and lower net charge-offs.
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: 9:00 am ET Dial-in: (800) 230-1059,
conference ID 423495
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 11:00 am ET on July 21 through August 21,
2017. Please dial (800) 475-6701 and enter access code 416825. 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 $151.4 billion in assets as of
June 30, 2017. 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.
Citizens helps its customers reach their potential by listening to
them and by understanding their needs in order to offer tailored
advice, ideas and solutions. In Consumer Banking, Citizens provides
an integrated experience that includes mobile and online banking, a
24/7 customer contact center and the convenience of approximately
3,200 ATMs and approximately 1,200 branches in 11 states in the New
England, Mid-Atlantic and Midwest regions. Consumer Banking
products and services include a full range of banking, lending,
savings, wealth management and small business offerings. 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 rate products, and
asset finance. More information is available at
www.citizensbank.com or visit us on Twitter, LinkedIn or
Facebook.
Key Performance Metrics and Non-GAAP
Financial Measures and Reconciliations
(in millions, except share, per-share and ratio data)
Key Performance Metrics:
Our management team uses 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. We have established the following financial targets, in
addition to others, as KPMs, which 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 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 (U.S. Basel III Standardized
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” or “Underlying”
results. We believe that these “Adjusted” or “Underlying” results
provide the best representation of our financial progress toward
these goals as they exclude items that our management does not
consider indicative of our ongoing financial performance. KPMs that
contain “Adjusted” or “Underlying” results are considered non-GAAP
financial measures.
Non-GAAP Financial Measures:
This document contains non-GAAP financial measures. The
following tables present reconciliations of our non-GAAP measures.
These reconciliations exclude “Adjusted” or “Underlying” items,
which are included, where applicable, in the financial results
presented in accordance with GAAP. “Adjusted” or “Underlying”
results, which are non-GAAP measures, exclude certain items, as
applicable, that may occur in a reporting period which management
does not consider indicative of on-going financial performance.
The non-GAAP measures presented in the following tables include
reconciliations to the most directly comparable GAAP measures and
are: “noninterest income”, “total revenue”, “ noninterest expense”,
“pre-provision profit”, “income before income tax expense”, “income
tax expense”, “effective income tax rate”, “net income”, “net
income available to common stockholders”, “other income”, “salaries
and employee benefits”, “outside services”, “amortization of
software expense”, “other operating expense”, “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 our
“Adjusted” or “Underlying” results in any period do not reflect our
operational performance in that period and, accordingly, it is
useful to consider our GAAP results and our “Adjusted” or
“Underlying” results together. 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(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17 Change 2Q17
1Q17 4Q16 3Q16 2Q16 1Q17
2Q16 $ % $ % Noninterest
income, Adjusted: Noninterest income (GAAP) $ 370 $ 379 $ 377 $
435 $ 355 ($9 ) (2 %) $ 15 4 % Less: Notable items —
— — 67 — — — — —
Noninterest income, Adjusted (non-GAAP) $ 370 $ 379 $ 377 $ 368
$ 355 ($9 ) (2 %) $ 15 4 %
Total revenue,
Adjusted: Total revenue (GAAP) A $ 1,396 $ 1,384 $ 1,363 $
1,380 $ 1,278 $ 12 1 % $ 118 9 % Less: Notable items —
— — 67 — — —
— — Total revenue, Adjusted (non-GAAP) B $ 1,396 $ 1,384 $
1,363 $ 1,313 $ 1,278 $ 12 1 % $ 118 9 %
Noninterest expense, Adjusted: Noninterest expense (GAAP) C
$ 864 $ 854 $ 847 $ 867 $ 827 $ 10 1 % $ 37 4 % Less: Notable items
— — — 36 — —
— — — Noninterest expense, Adjusted (non-GAAP) D $
864 $ 854 $ 847 $ 831 $ 827 $ 10 1 % $ 37 4 %
Pre-provision profit: Total revenue (GAAP) A $ 1,396 $ 1,384
$ 1,363 $ 1,380 $ 1,278 $ 12 1 % $ 118 9 % Noninterest expense
(GAAP) C 864 854 847 867
827 10 1 37 4 Pre-provision profit (GAAP) $
532 $ 530 $ 516 $ 513 $ 451 $ 2 — % $ 81 18 %
Pre-provision profit, Adjusted: Total revenue, Adjusted
(non-GAAP) B $ 1,396 $ 1,384 $ 1,363 $ 1,313 $ 1,278 $ 12 1 % $ 118
9 % Less: Noninterest expense, Adjusted (non-GAAP) D 864
854 847 831 827 10
1 37 4 Pre-provision profit, Adjusted (non-GAAP) $ 532 $ 530
$ 516 $ 482 $ 451 $ 2 — % $ 81 18 %
Income before
income tax expense, Adjusted: Income before income tax expense
(GAAP) $ 462 $ 434 $ 414 $ 427 $ 361 $ 28 6 % $ 101 28 % Less:
Income before income tax expense (benefit) related to notable items
— — — 31 — —
— — — Income before income tax expense, Adjusted
(non-GAAP) $ 462 $ 434 $ 414 $ 396 $ 361 $ 28 6 % $
101 28 %
Income tax expense, Adjusted: Income tax expense
(GAAP) $ 144 $ 114 $ 132 $ 130 $ 118 $ 30 26 % $ 26 22 % Less:
Income tax expense (benefit) related to notable items —
— — 12 — — —
— — Income tax expense, Adjusted (non-GAAP) $ 144 $ 114 $
132 $ 118 $ 118 $ 30 26 % $ 26 22 %
Net income,
Adjusted: Net income (GAAP) E $ 318 $ 320 $ 282 $ 297 $ 243 ($2
) (1 %) $ 75 31 % Add: Notable items, net of income tax expense
(benefit) — — — (19 ) — —
— — — Net income, Adjusted (non-GAAP) F $ 318 $ 320 $
282 $ 278 $ 243 ($2 ) (1 %) $ 75 31 %
Net income
available to common stockholders, Adjusted: Net income
available to common stockholders (GAAP) G $ 318 $ 313 $ 282 $ 290 $
243 $ 5 2 % $ 75 31 % Add: Notable items, net of income tax expense
(benefit) — — — (19 ) — —
— — — Net income available to common stockholders,
Adjusted (non-GAAP) H $ 318 $ 313 $ 282 $ 271 $ 243 $ 5
2 % $ 75 31 %
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17 Change 2Q17
1Q17 4Q16 3Q16 2Q16 1Q17
2Q16 $/bps % $/bps %
Operating leverage: Total revenue (GAAP) A $ 1,396 $ 1,384 $
1,363 $ 1,380 $ 1,278 $ 12 0.87 % $ 118 9.23 % Less: Noninterest
expense (GAAP) C 864 854 847 867 827 10 1.17 37 4.47
Operating leverage (0.30 %) 4.76 %
Operating leverage,
Adjusted: Total revenue, Adjusted (non-GAAP) B $ 1,396 $ 1,384
$ 1,363 $ 1,313 $ 1,278 $ 12 0.87 % $ 118 9.23 % Less: Noninterest
expense, Adjusted (non-GAAP) D 864 854 847 831 827 10 1.17
37 4.47 Operating leverage, Adjusted (non-GAAP) (0.30 %)
4.76 %
Efficiency ratio and efficiency ratio, Adjusted:
Efficiency ratio C/A 61.94 % 61.68 % 62.18 % 62.88 % 64.71 % 26 bps
(277 ) bps Efficiency ratio, Adjusted (non-GAAP) D/B 61.94 61.68
62.18 63.31 64.71 26 bps (277 ) bps
Return on average common
equity and return on average common equity, Adjusted: Average
common equity (GAAP) I $ 19,659 $ 19,460 $ 19,645 $ 19,810 $ 19,768
$ 199 1 % ($109 ) (1 %) Return on average common equity G/I 6.48 %
6.52 % 5.70 % 5.82 % 4.94 % (4 ) bps 154 bps Return on average
common equity, Adjusted (non-GAAP) H/I 6.48 6.52 5.70 5.44 4.94 (4
) bps 154 bps
Return on average tangible common equity and
return on average tangible common equity, Adjusted: Average
common equity (GAAP) I $ 19,659 $ 19,460 $ 19,645 $ 19,810 $ 19,768
$ 199 1 % ($109 ) (1 %) Less: Average goodwill (GAAP) 6,882 6,876
6,876 6,876 6,876 6
-
6
-
Less: Average other intangibles (GAAP) 2
-
1 1 2 2 100
-
-
Add: Average deferred tax liabilities related to goodwill (GAAP)
534 531 523 509
496 3 1 38 8
Average tangible common equity J $ 13,309 $ 13,115 $
13,291 $ 13,442 $ 13,386 $ 194 1 %
($77 ) (1 %) Return on average tangible common equity G/J
9.57 % 9.68 % 8.43 % 8.58 % 7.30 % (11 ) bps 227 bps Return on
average tangible common equity, Adjusted (non-GAAP) H/J 9.57 9.68
8.43 8.02 7.30 (11 ) bps 227 bps
Return on average total assets
and return on average total assets, Adjusted: Average total
assets (GAAP) K $ 149,878 $ 148,786 $ 147,315 $ 144,399 $ 142,179 $
1,092 1 % $ 7,699 5 % Return on average total assets E/K 0.85 %
0.87 % 0.76 % 0.82 % 0.69 % (2 ) bps 16 bps Return on average total
assets, Adjusted (non-GAAP) F/K 0.85 0.87 0.76 0.77 0.69 (2 ) bps
16 bps
Return on average total tangible assets and return on
average total tangible assets, Adjusted: Average total assets
(GAAP) K $ 149,878 $ 148,786 $ 147,315 $ 144,399 $ 142,179 $ 1,092
1 % $ 7,699 5 % Less: Average goodwill (GAAP) 6,882 6,876 6,876
6,876 6,876 6
-
6
-
Less: Average other intangibles (GAAP) 2
-
1 1 2 2 100
-
-
Add: Average deferred tax liabilities related to goodwill (GAAP)
534 531 523 509
496 3 1 38 8
Average tangible assets L $ 143,528 $ 142,441 $
140,961 $ 138,031 $ 135,797 $ 1,087 1 %
$ 7,731 6 % Return on average total tangible assets E/L 0.89
% 0.91 % 0.79 % 0.86 % 0.72 % (2 ) bps 17 bps Return on average
total tangible assets, Adjusted (non-GAAP) F/L 0.89 0.91 0.79 0.80
0.72 (2 ) bps 17 bps
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17 Change 2Q17
1Q17 4Q16 3Q16 2Q16 1Q17
2Q16 $/bps % $/bps % Tangible
book value per common share: Common shares - at end of period
(GAAP) M 505,880,851 509,515,646 511,954,871 518,148,345
529,094,976 (3,634,795 ) (1 %) (23,214,125 ) (4 %) Common
stockholders' equity (GAAP) $ 19,817 $ 19,600 $ 19,499 $ 19,934 $
19,979 $ 217 1 ($162 ) (1 ) Less: Goodwill (GAAP) 6,887 6,876 6,876
6,876 6,876 11 — 11 — Less: Other intangible assets (GAAP) 2 — 1 1
2 2 100 — — Add: Deferred tax liabilities related to goodwill
(GAAP) 535 534 532
519 507 1 — 28 6
Tangible common equity N $ 13,463 $ 13,258 $ 13,154
$ 13,576 $ 13,608 $ 205 2 %
($145 ) (1 %) Tangible book value per common share N/M $ 26.61 $
26.02 $ 25.69 $ 26.20 $ 25.72 $ 0.59 2 % $ 0.89 3 %
Net income
per average common share - basic and diluted, Adjusted: Average
common shares outstanding - basic (GAAP) O 506,371,846 509,451,450
512,015,920 519,458,976 528,968,330 (3,079,604 ) (1 %) (22,596,484
) (4 %) Average common shares outstanding - diluted (GAAP) P
507,414,122 511,348,200 513,897,085 521,122,466 530,365,203
(3,934,078 ) (1 ) (22,951,081 ) (4 ) Net income available to common
stockholders (GAAP) G $ 318 $ 313 $ 282 $ 290 $ 243 $ 5 2 $ 75 31
Net income per average common share - basic (GAAP) G/O 0.63 0.61
0.55 0.56 0.46 0.02 3 0.17 37 Net income per average common share -
diluted (GAAP) G/P 0.63 0.61 0.55 0.56 0.46 0.02 3 0.17 37 Net
income available to common stockholders, Adjusted (non-GAAP) H 318
313 282 271 243 5 2 75 31 Net income per average common share -
basic, Adjusted (non-GAAP) H/O 0.63 0.61 0.55 0.52 0.46 0.02 3 0.17
37 Net income per average common share - diluted, Adjusted
(non-GAAP) H/P 0.63 0.61 0.55 0.52 0.46 0.02 3 0.17 37
Pro forma
U.S. Basel III fully phased-in common equity tier 1 capital
ratio1: Common equity tier 1 capital (regulatory)
$ 14,057 $ 13,941 $ 13,822 $ 13,763 $ 13,768 Less: Change in DTA
and other threshold deductions (GAAP) — —
— — 1 Pro forma
Basel III fully phased-in common equity tier 1 capital Q $ 14,057
$ 13,941 $ 13,822 $ 13,763 $ 13,767
Risk-weighted assets (regulatory general risk weight
approach) $ 125,774 $ 124,881 $ 123,857 $ 121,612 $ 119,492 Add:
Net change in credit and other risk-weighted assets (regulatory)
249 247 244 228
228 Pro forma Basel III standardized approach
risk-weighted assets R $ 126,023 $ 125,128 $ 124,101
$ 121,840 $ 119,720 Pro forma Basel III fully
phased-in common equity tier 1 capital ratio1 Q/R 11.2 % 11.1 %
11.1 % 11.3 % 11.5 %
1) U.S. Basel III ratios assume certain definitions impacting
qualifying U.S. 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(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17 Change 2Q17 1Q17
4Q16 3Q16 2Q16 1Q17 2Q16
$ % $ % Other income, Adjusted
Other income (GAAP) $ 2 $ 24 $ 25 $ 87 $ 15 ($22 ) (92 %) ($13 )
(87 %) Less: Notable items — — — 67
— — — — — Other income, Adjusted
(non-GAAP) $ 2 $ 24 $ 25 $ 20 $ 15 ($22 ) (92 %) ($13
) (87 %)
Salaries and employee benefits, Adjusted: Salaries
and employee benefits (GAAP) $ 432 $ 444 $ 420 $ 432 $ 432 ($12 )
(3 %) $ — — % Less: Notable items — — —
11 — — — — — Salaries and
employee benefits, Adjusted (non-GAAP) $ 432 $ 444 $ 420 $ 421 $
432 ($12 ) (3 %) $ — — %
Outside services,
Adjusted: Outside services (GAAP) $ 96 $ 91 $ 98 $ 102 $ 86 $ 5
5 % $ 10 12 % Less: Notable items — — —
8 — — — — — Outside services,
Adjusted (non-GAAP) $ 96 $ 91 $ 98 $ 94 $ 86 $ 5 5 % $ 10
12 %
Occupancy, Adjusted: Occupancy (GAAP) $ 79 $ 82
$ 77 $ 78 $ 76 ($3 ) (4 %) $ 3 4 % Less: Notable items —
— — — — — — —
— Occupancy, Adjusted (non-GAAP) $ 79 $ 82 $ 77 $ 78 $ 76
($3 ) (4 %) $ 3 4 %
Equipment expense,
Adjusted: Equipment expense (GAAP) $ 64 $ 67 $ 69 $ 65 $ 64 ($3
) (4 %) $ — — % Less: Notable items — — —
— — — — — — Equipment
expense, Adjusted (non-GAAP) $ 64 $ 67 $ 69 $ 65 $ 64 ($3 )
(4 %) $ — — %
Amortization of software, Adjusted:
Amortization of software (GAAP) $ 45 $ 44 $ 44 $ 46 $ 41 $ 1 2 % $
4 10 % Less: Notable items — — — 3
— — — — — Amortization of
software, Adjusted (non-GAAP) $ 45 $ 44 $ 44 $ 43 $ 41 $ 1 2
% $ 4 10 %
Other operating expense, Adjusted: Other
operating expense (GAAP) $ 148 $ 126 $ 139 $ 144 $ 128 $ 22 17 % $
20 16 % Less: Notable items — — — 14
— — — — — Other operating
expense, Adjusted (non-GAAP) $ 148 $ 126 $ 139 $ 130 $ 128 $ 22
17 % $ 20 16 %
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
THREE MONTHS ENDED JUNE 30, THREE MONTHS ENDED MAR
31, 2017 2017 Consumer Banking
Commercial Banking
Other Consolidated Consumer
Banking Commercial Banking
Other Consolidated
Net income available to common stockholders: Net income
(loss) (GAAP) A $ 118 $ 187 $ 13 $ 318 $ 95 $ 180 $ 45 $ 320 Less:
Preferred stock dividends — — —
— — — 7
7 Net income available to common stockholders
B $ 118 $ 187 $ 13 $ 318 $ 95 $
180 $ 38 $ 313
Return on average tangible
common equity: Average common equity (GAAP) $ 5,519 $ 5,617 $
8,523 $ 19,659 $ 5,460 $ 5,528 $ 8,472 $ 19,460 Less: Average
goodwill (GAAP) — — 6,882 6,882 — — 6,876 6,876 Average other
intangibles (GAAP) — — 2 2 — — — — Add: Average deferred tax
liabilities related to goodwill (GAAP) — —
534 534 — —
531 531 Average tangible common
equity C $ 5,519 $ 5,617 $ 2,173 $ 13,309
$ 5,460 $ 5,528 $ 2,127 $ 13,115
Return on average tangible common equity B/C 8.57 % 13.37 % NM 9.57
% 7.06 % 13.18 % NM 9.68 %
Return on average total tangible
assets: Average total assets (GAAP) $ 59,244 $ 49,731 $ 40,903
$ 149,878 $ 58,660 $ 49,243 $ 40,883 $ 148,786 Less: Average
goodwill (GAAP) — — 6,882 6,882 — — 6,876 6,876 Average other
intangibles (GAAP) — — 2 2 — — — — Add: Average deferred tax
liabilities related to goodwill (GAAP) — —
534 534 —
— 531 531 Average
tangible assets D $ 59,244 $ 49,731 $ 34,553 $
143,528 $ 58,660 $ 49,243 $ 34,538
$ 142,441 Return on average total tangible assets A/D
0.80 % 1.51 % NM 0.89 % 0.66 % 1.48 % NM 0.91 %
Efficiency
ratio: Noninterest expense (GAAP) E $ 644 $ 192 $ 28 $ 864 $
647 $ 190 $ 17 $ 854 Net interest income (GAAP) 657 344 25 1,026
638 346 21 1,005 Noninterest income (GAAP) 229
130 11 370 220
134 25 379 Total revenue
(GAAP) F $ 886 $ 474 $ 36 $ 1,396 $ 858
$ 480 $ 46 $ 1,384 Efficiency ratio E/F
72.64 % 40.48 % NM 61.94 % 75.41 % 39.80 % NM 61.68 %
THREE MONTHS ENDED DEC 31, THREE MONTHS ENDED SEPT
30, 2016 2016 Consumer Banking
Commercial Banking Other Consolidated
Consumer Banking Commercial Banking Other
Consolidated Net income available to common
stockholders: Net income (loss) (GAAP) A $ 92 $ 172 $ 18 $ 282
$ 92 $ 162 $ 43 $ 297 Less: Preferred stock dividends —
— — — —
— 7 7 Net income
available to common stockholders B $ 92 $ 172 $ 18
$ 282 $ 92 $ 162 $ 36 $ 290
Return on average tangible common equity: Average
common equity (GAAP) $ 5,275 $ 5,278 $ 9,092 $ 19,645 $ 5,190 $
5,172 $ 9,448 $ 19,810 Less: Average goodwill (GAAP) — — 6,876
6,876 — — 6,876 6,876 Average other intangibles (GAAP) — — 1 1 — —
1 1 Add: Average deferred tax liabilities related to goodwill
(GAAP) — — 523 523
— — 509 509
Average tangible common equity C $ 5,275 $ 5,278
$ 2,738 $ 13,291 $ 5,190 $ 5,172
$ 3,080 $ 13,442 Return on average tangible common
equity B/C 6.97 % 12.94 % NM 8.43 % 7.04 % 12.50 % NM 8.58 %
Return on average total tangible assets: Average total
assets (GAAP) $ 58,066 $ 48,024 $ 41,225 $ 147,315 $ 56,689 $
47,902 $ 39,808 $ 144,399 Less: Average goodwill (GAAP) — — 6,876
6,876 — — 6,876 6,876 Average other intangibles (GAAP) — — 1 1 — —
1 1 Add: Average deferred tax liabilities related to goodwill
(GAAP) — — 523 523
— — 509 509
Average tangible assets D $ 58,066 $ 48,024 $
34,871 $ 140,961 $ 56,689 $ 47,902 $
33,440 $ 138,031 Return on average total tangible
assets A/D 0.63 % 1.42 % NM 0.79 % 0.64 % 1.35 % NM 0.86 %
Efficiency ratio: Noninterest expense (GAAP) E $ 649 $ 187 $
11 $ 847 $ 650 $ 181 $ 36 $ 867 Net interest income (GAAP) 639 347
— 986 621 327 (3 ) 945 Noninterest income (GAAP) 227
122 28 377 229
123 83 435 Total
revenue (GAAP) F $ 866 $ 469 $ 28 $ 1,363
$ 850 $ 450 $ 80 $ 1,380
Efficiency ratio E/F 74.90 % 39.83 % NM 62.18 % 76.46 % 40.21 % NM
62.88 %
THREE MONTHS ENDED JUNE 30,
2016 Consumer Banking Commercial Banking
Other Consolidated Net income available to common
stockholders: Net income (loss) (GAAP) A $ 90 $ 164 ($11 ) $
243 Less: Preferred stock dividends — —
— — Net income available to common
stockholders B $ 90 $ 164 ($11 ) $ 243
Return on average tangible common equity: Average common
equity (GAAP) $ 5,110 $ 5,040 $ 9,618 $ 19,768 Less: Average
goodwill (GAAP) — — 6,876 6,876 Average other intangibles (GAAP) —
— 2 2 Add: Average deferred tax liabilities related to goodwill
(GAAP) — — 496 496
Average tangible common equity C $ 5,110 $ 5,040
$ 3,236 $ 13,386 Return on average tangible
common equity B/C 7.09 % 13.04 % NM 7.30 %
Return on average
total tangible assets: Average total assets (GAAP) $ 55,660 $
47,388 $ 39,131 $ 142,179 Less: Average goodwill (GAAP) — — 6,876
6,876 Average other intangibles (GAAP) — — 2 2 Add: Average
deferred tax liabilities related to goodwill (GAAP) —
— 496 496 Average
tangible assets D $ 55,660 $ 47,388 $ 32,749 $
135,797 Return on average total tangible assets A/D 0.65 %
1.39 % NM 0.72 %
Efficiency ratio: Noninterest expense
(GAAP) E $ 632 $ 186 $ 9 $ 827 Net interest income (GAAP) 602 314 7
923 Noninterest income (GAAP) 219 122
14 355 Total revenue (GAAP) F $ 821
$ 436 $ 21 $ 1,278 Efficiency ratio E/F
76.98 % 42.88 % NM 64.71 %
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17
Change 2Q17 1Q17 2Q16 1Q17
2Q16 $/bps % $/bps %
Noninterest income, Underlying: Noninterest income (GAAP) $
370 $ 379 $ 355 ($9 ) (2 %) $ 15 4 % Less: Lease impairment
credit-related costs (11 ) — —
(11 ) (100 ) (11 ) (100 ) Noninterest income,
Underlying (non-GAAP) $ 381 $ 379 $ 355 $ 2
1 % $ 26 7 %
Total revenue, Underlying: Total
revenue (GAAP) A $ 1,396 $ 1,384 $ 1,278 $ 12 1 % $ 118 9 % Less:
Lease impairment credit-related costs (11 ) —
— (11 ) (100 ) (11 ) (100 ) Total
revenue, Underlying (non-GAAP) B $ 1,407 $ 1,384 $
1,278 $ 23 2 % $ 129 10 %
Noninterest
expense, Underlying: Noninterest expense (GAAP) C $ 864 $ 854 $
827 $ 10 1 % $ 37 4 % Less: Lease impairment credit-related costs
15 — — 15
100 15 100 Noninterest expense, Underlying (non-GAAP)
D $ 849 $ 854 $ 827 ($5 ) (1 %) $ 22
3 %
Pre-provision profit, Underlying Pre-provision
profit (GAAP) $ 532 $ 530 $ 451 $ 2 — % $ 81 18 % Less: Lease
impairment credit-related costs (26 ) —
— (26 ) (100 ) (26 ) (100 ) Pre-provision
profit, Underlying (non-GAAP) $ 558 $ 530 $ 451
$ 28 5 % $ 107 24 %
Total credit-related
costs, Underlying: Provision for credit losses (GAAP) $ 70 $ 96
$ 90 ($26 ) (27 %) ($20 ) (22 %) Add: Lease impairment
credit-related costs 26 — —
26 NM 26 NM Total credit-related
costs, Underlying (non-GAAP) $ 96 $ 96 $ 90 $
— — % $ 6 7 %
Income before income tax expense,
Underlying: Income before income tax expense (GAAP) E $ 462 $
434 $ 361 $ 28 6 % $ 101 28 %
Income tax expense and effective
income tax rate, Underlying: Income tax expense (GAAP) F $ 144
$ 114 $ 118 $ 30 26 % $ 26 22 % Less: Settlement of certain state
tax matters — (23 ) — 23
100 — — Income tax expense, Underlying
(non-GAAP) G $ 144 $ 137 $ 118 $ 7 5 %
$ 26 22 % Effective income tax rate (GAAP) F/E 31.13 % 26.36
% 32.61 % 477 bps (148 ) bps Effective income tax rate, Underlying
(non-GAAP) G/E 31.13 31.56 32.61 (43 ) bps (148 ) bps
Net
income, Underlying: Net income (GAAP) H $ 318 $ 320 $ 243 ($2 )
(1 %) $ 75 31 % Less: Settlement of certain state tax matters
— 23 — (23 ) (100
) — — Net income, Underlying (non-GAAP) I $ 318
$ 297 $ 243 $ 21 7 % $ 75 31 %
Net income available to common stockholders, Underlying: Net
income available to common stockholders (GAAP) J $ 318 $ 313 $ 243
$ 5 2 % $ 75 31 % Less: Settlement of certain state tax matters
— 23 — (23 ) (100
) — — Net income available to common stockholders,
Underlying (non-GAAP) K $ 318 $ 290 $ 243 $ 28
10 % $ 75 31 %
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS
2Q17 Change 2Q17 1Q17 2Q16 1Q17
2Q16 $/bps
% $/bps % Operating
leverage: Total revenue (GAAP) A $ 1,396 $ 1,384 $ 1,278 $ 12
0.87 % $ 118 9.23 % Less: Noninterest expense (GAAP) C 864 854 827
10 1.17 37 4.47 Operating leverage (0.30 %) 4.76 %
Operating leverage, Underlying: Total revenue, Underlying
(non-GAAP) B $ 1,407 $ 1,384 $ 1,278 $ 23 1.66 % $ 129 10.09 %
Less: Noninterest expense, Underlying (non-GAAP) D 849 854 827 (5 )
(0.59 ) 22 2.66 Operating leverage, Underlying (non-GAAP)
2.25 % 7.43 %
Efficiency ratio and efficiency ratio,
Underlying: Efficiency ratio C/A 61.94 % 61.68 % 64.71 % 26 bps
(277 ) bps Efficiency ratio, Underlying (non-GAAP) D/B 60.36 61.68
64.71 (132 ) bps (435 ) bps
Return on average common equity and
return on average common equity, Underlying: Average common
equity (GAAP) L $ 19,659 $ 19,460 $ 19,768 $ 199 1 % ($109 ) (1 %)
Return on average common equity J/L 6.48 % 6.52 % 4.94 % (4 ) bps
154 bps Return on average common equity, Underlying (non-GAAP) K/L
6.48 6.05 4.94 43 bps 154 bps
Return on average tangible common
equity and return on average tangible common equity,
Underlying: Average common equity (GAAP) L $ 19,659 $ 19,460 $
19,768 $ 199 1 % ($109 ) (1 %) Less: Average goodwill (GAAP) 6,882
6,876 6,876 6 — 6 — Less: Average other intangibles (GAAP) 2 — 2 2
100 — — Add: Average deferred tax liabilities related to goodwill
(GAAP) 534 531 496
3 1 38 8 Average tangible common equity M $
13,309 $ 13,115 $ 13,386 $ 194 1 %
($77 ) (1 %) Return on average tangible common equity J/M
9.57 % 9.68 % 7.30 % (11 ) bps 227 bps Return on average tangible
common equity, Underlying (non-GAAP) K/M 9.57 8.98 7.30 59 bps 227
bps
Return on average total assets and return on average total
assets, Underlying: Average total assets (GAAP) N $ 149,878 $
148,786 $ 142,179 $ 1,092 1 % $ 7,699 5 % Return on average total
assets H/N 0.85 % 0.87 % 0.69 % (2 ) bps 16 bps Return on average
total assets, Underlying (non-GAAP) I/N 0.85 0.81 0.69 4 bps 16 bps
Key performance metrics, non-GAAP financial measures and
reconciliations(in millions, except share, per-share and ratio
data)
QUARTERLY TRENDS 2Q17
Change 2Q17 1Q17 2Q16 1Q17
2Q16 $/bps % $/bps % Return
on average total tangible assets and return on average total
tangible assets, Underlying: Average total assets (GAAP) N $
149,878 $ 148,786 $ 142,179 $ 1,092 1 % $ 7,699 5 % Less: Average
goodwill (GAAP) 6,882 6,876 6,876 6 — 6 — Less: Average other
intangibles (GAAP) 2 — 2 2 100 — — Add: Average deferred tax
liabilities related to goodwill (GAAP) 534 531
496 3 1 38 8
Average tangible assets O $ 143,528 $ 142,441 $
135,797 $ 1,087 1 % $ 7,731 6 % Return on
average total tangible assets H/O 0.89 % 0.91 % 0.72 % (2 ) bps 17
bps Return on average total tangible assets, Underlying (non-GAAP)
I/O 0.89 0.85 0.72 4 bps 17 bps
Net income per average common
share - basic and diluted, Underlying: Average common shares
outstanding - basic (GAAP) P 506,371,846 509,451,450 528,968,330
(3,079,604 ) (1 %) (22,596,484 ) (4 %) Average common shares
outstanding - diluted (GAAP) Q 507,414,122 511,348,200 530,365,203
(3,934,078 ) (1 ) (22,951,081 ) (4 ) Net income available to common
stockholders (GAAP) J $ 318 $ 313 $ 243 $ 5 2 $ 75 31 Net income
per average common share - basic (GAAP) J/P 0.63 0.61 0.46 0.02 3
0.17 37 Net income per average common share - diluted (GAAP) J/Q
0.63 0.61 0.46 0.02 3 0.17 37 Net income available to common
stockholders, Underlying (non-GAAP) K 318 290 243 28 10 75 31 Net
income per average common share - basic, Underlying (non-GAAP) K/P
0.63 0.57 0.46 0.06 11 0.17 37 Net income per average common share
- diluted, Underlying (non-GAAP) K/Q 0.63 0.57 0.46 0.06 11 0.17 37
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 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,
2016, filed with the United States Securities and Exchange
Commission on February 24, 2017.
Note: Percentage changes, per share amounts and ratios presented
in this document are calculated using whole dollars.
CFG-IR
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version on businesswire.com: http://www.businesswire.com/news/home/20170721005164/en/
Citizens Financial Group, Inc.Media:Peter Lucht,
781-655-2289orInvestors:Ellen A. Taylor, 203-900-6854
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