Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): July 25, 2016

 

 

CITIZENS FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-36636   05-0412693

(State or other jurisdiction

of incorporation)

 

(Commission

File No.)

 

(IRS Employer

Identification No.)

 

One Citizens Plaza

Providence, RI

  02903
(Address of principal executive offices)   (Zip code)

Registrant’s telephone number, including area code: (401) 456-7000

Not Applicable

(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 8.01 Other Events.

On July 21, 2016, Citizens Financial Group, Inc. (the “Company,” “Citizens” or “we”) reported second quarter net income of $243 million, or $0.46 per diluted common share, up 28% and 31%, respectively, from $190 million and $0.35 per diluted common share in second quarter 2015. Compared with first quarter 2016, net income increased 9% from $223 million and diluted earnings per common share increased 12% from $0.41. Second quarter 2015 results include an after-tax restructuring charge impact of $0.05 per diluted share, largely related to efforts to improve processes and enhance efficiencies as well as rebranding and separation from RBS. Adjusting for these charges, second quarter 2015 Adjusted* EPS was $0.40 and second quarter 2016 year-on-year improvement was 15%. Return on Average Tangible Common Equity* (“ROTCE”) was 7.3% in second quarter 2016 compared to 6.6% in first quarter 2016 and an Adjusted* 6.7% in second quarter 2015.

 

* These are non-GAAP financial measures. Please see Non-GAAP Reconciliation Tables at the end of this release for an explanation of our use of non-GAAP financial measures and their reconciliation to GAAP. Where there is a reference to an “Adjusted” result in a paragraph, all measures that follow that “Adjusted” result are also “Adjusted” and exclude restructuring charges and special items as applicable. There were no restructuring charges or special items in first and second quarter of 2016.


Citizens Financial Group, Inc.

 

Second Quarter 2016 vs. First Quarter 2016

Key Highlights

 

    Second quarter highlights include net income growth of 9%, with 4% revenue growth highlighted by 2% average loan and deposit growth and a 1% improvement in the efficiency ratio* to 65%. These results helped drive a 70 basis point improvement in ROTCE* to 7.3%.

Results

 

    Total revenue of $1.3 billion was up $44 million, or 4%, driven by 8% noninterest income growth and 2% net interest income growth.

 

    Net interest income of $923 million was up $19 million, or 2%, driven by commercial and student loan growth.

 

    Net interest margin of 2.84% compares with 2.86% in the prior quarter, driven by loan growth and improved loan yields and stable deposit costs.

 

    Noninterest income of $355 million increased $25 million, or 8%.

 

    Headcount down 74.

 

    Noninterest expense of $827 million increased 2%, reflecting salaries and employee benefits, related to a change in timing of merit increases and incentive payments, as well as higher regulatory, fraud and insurance costs.

 

    Efficiency ratio* of 65% improved 1%.

 

    Provision for credit losses of $90 million remained stable, with an $18 million decrease in net charge-offs and a $25 million reserve build tied to loan growth.

Balance Sheet

 

    Average interest-earning assets increased $3.3 billion, or 3%.

 

    Average deposits increased $2.0 billion, or 2%.

 

    Nonperforming loans and leases (“NPLs”) to total loans and leases ratio improved 6 basis points to 1.01% with improvement in both the commercial and retail portfolios. Allowance coverage of NPLs improved to 119% from 113%.

 


Citizens Financial Group, Inc.

 

    Net charge-offs improved to 25 basis points from 33 basis points, with a reduction in both commercial and retail.

 

    Completed $1.0 billion offering of five-year 2.550% senior unsecured bank notes.

 

    Common equity tier 1 (“CET1”) risk-based capital ratio of 11.5%. Dividend increased 20% to $0.12 per common share as of May 4, 2016.

Second Quarter 2016 vs. Second Quarter 2015

Key Highlights

 

    Second quarter highlights include net income growth of 28%, or 13% on an Adjusted* basis, led by a 10% increase in net interest income and a 12 basis point increase in net interest margin, along with 3% Adjusted* operating leverage. The efficiency ratio* improved to 65% from an Adjusted efficiency ratio* of 67%.

Results

 

    Total revenue of $1.3 billion increased 7%, driven by loan growth and net interest margin improvement as well as growth in service charges and fees and capital markets fees.

 

    Net interest income was up $83 million, primarily reflecting higher commercial, student, mortgage and auto loan growth, partially offset by lower investment portfolio income, which reflects a reduction in Federal Reserve Bank stock dividends, and an increase in debt borrowing costs.

 

    Net interest margin of 2.84% increased 12 basis points, driven by improved loan yields.

 

    Noninterest income of $355 million declined $5 million from second quarter 2015 levels that exclude the impact of the reclassification of $7 million of card reward costs. Service charges and fees and capital markets fees were offset by lower card fees due to the card reward accounting change impact in 2016, lower securities gains and lower mortgage banking servicing rights valuation.

 

    Noninterest expense of $827 million decreased $14 million, reflecting a $40 million reduction in restructuring charges and special items. Results included a $21 million increase in salary and employee benefits largely related to a change in timing of merit increases and incentive payments as well as higher software amortization and equipment depreciation costs. Second quarter 2015 results exclude the impact of the reclassification of $7 million of card reward costs.

 

    Headcount was down 75.

 

    Provision for credit losses of $90 million increased $13 million and reflects a $13 million decrease in net charge-offs as well as a $25 million reserve build tied to loan growth.

 

    ROTCE* of 7.3% improved 140 basis points and more than 60 basis points on an Adjusted basis.

 


Citizens Financial Group, Inc.

 

Balance Sheet

 

    Average interest-earning assets increased $6.3 billion, or 5%.

 

    Average deposits increased $5.4 billion, or 6%.

 

    NPLs to total loans and leases ratio improved 8 basis points from 1.09% in the second quarter 2015. Allowance coverage of NPLs improved by 5% to 119% from 114% in second quarter 2015.

 

    Net charge-offs of 25 basis points improved 8 basis points from 33 basis points in second quarter 2015.

Update on Plan Execution

 

    Continued progress on initiatives to drive growth and enhance efficiency.

 

    Consumer Banking – New customer checking account households up ~3,000 from second quarter 2015 with growth of 3% in average deposits and 5% in service charges and fees. Progress on salesforce expansion in both Wealth Management and Mortgage Banking.

 

    Commercial Banking – 11% average loan growth from second quarter 2015 with increases in Commercial Real Estate, Industry Verticals, Corporate Finance, Franchise Finance and Mid-corporate; Treasury Solutions fee income up 16% from second quarter 2015.

 

    Incremental revenue and efficiency initiatives are tracking as planned.

 

    Balance sheet optimization initiatives to improve low-cost core deposit growth and shift loan portfolio mix to higher-return categories progressing well.

 

    Closed troubled debt restructurings (“TDR Transaction”) in third quarter 2016 at a pre-tax gain of approximately $70 million, improving underlying credit quality while providing opportunity for improved risk-adjusted returns.

 

    TOP II initiatives are performing well, as we remain on track to deliver $90 - $115 million of pre-tax benefits in 2016 with expense savings fully realized and revenue initiatives well underway.

 

    TOP III initiatives are projected to deliver 2017 pre-tax revenue and expense benefits of $73-90 million and $10-$15 million of tax benefits. These will help to fund continued investments to drive future growth, particularly in our fee-based businesses.

 

    Expect to utilize approximately 30% to 40% of the TDR Transaction gain to fund costs associated with TOP III initiatives as well as other balance sheet optimization efforts.

 


Citizens Financial Group, Inc.

 

Earnings highlights                      2Q16 change from  

($s in millions, except per share data)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Earnings

              

Net interest income

   $ 923      $ 904      $ 840      $ 19        2   $ 83        10

Noninterest income

     355        330        360        25        8        (5     (1

Total revenue

     1,278        1,234        1,200        44        4        78        7   

Noninterest expense

     827        811        841        16        2        (14     (2

Pre-provision profit

     451        423        359        28        7        92        26   

Provision for credit losses

     90        91        77        (1     (1     13        17   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income

     243        223        190        20        9        53        28   

Net income available to common shareholders

     243        216        190        27        13        53        28   

After-tax restructuring charges and special items*

   $  —        $  —        $ 25      $  —          —     $ (25     (100 )% 
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income available to common shareholders excluding restructuring charges and special items*

   $ 243      $ 216      $ 215      $ 27        13   $ 28        13
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Average common shares outstanding

              

Basic (in millions)

     529.0        528.1        537.7        0.9        —       (8.8     (2 )% 

Diluted (in millions)

     530.4        530.4        539.9        (0.1     —       (9.5     (2 )% 

Diluted earnings per share

   $ 0.46      $ 0.41      $ 0.35      $ 0.05        12   $ 0.11        31

Diluted earnings per share, excluding restructuring charges and special items*

   $ 0.46      $ 0.41      $ 0.40      $ 0.05        12   $ 0.06        15
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Financial ratios

              

Net interest margin

     2.84     2.86     2.72     (2 ) bps        12   bps   

Effective income tax rate

     32.6        32.9        32.7        (26 ) bps        (8 ) bps   

Efficiency ratio*

     65        66        70        (95 ) bps        (531 ) bps   

Efficiency ratio, excluding restructuring charges and special items*

     65        66        67        (95 ) bps        (199 ) bps   

Return on average tangible common equity*

     7.3        6.6        5.9        69   bps        140   bps   

Return on average tangible common equity, excluding restructuring charges and special items*

     7.3        6.6        6.7        69   bps        63   bps   

Return on average common equity

     4.9        4.5        3.9        49   bps        100   bps   

Return on average total assets

     0.7        0.6        0.6        4   bps        13   bps   

Return on average total tangible assets*

     0.7     0.7     0.6     4   bps        13   bps   
  

 

 

   

 

 

   

 

 

         

Capital adequacy(1)(2)

              

Common equity tier 1 capital ratio

     11.5     11.6     11.8        

Total capital ratio

     14.9        15.1        15.3           

Tier 1 leverage ratio

     10.3     10.4     10.4        
  

 

 

   

 

 

   

 

 

         

Asset quality(2)

              

Total nonperforming loans and leases as a % of total loans and leases

     1.01     1.07     1.09     (6 ) bps        (8 ) bps   

Allowance for loan and lease losses as a % of loans and leases

     1.20        1.21        1.24        (1 ) bps        (4 ) bps   

Allowance for loan and lease losses as a % of nonperforming loans and leases

     119        113        114        584   bps        490   bps   

Net charge-offs as a % of average loans and leases

     0.25     0.33     0.33     (8 ) bps        (8 ) bps   
  

 

 

   

 

 

   

 

 

         

 

* These are non-GAAP financial measures. Please see Non-GAAP Reconciliation Tables at the end of this release for an explanation of our use of non-GAAP financial measures and reconciliation of those non-GAAP financial measures to GAAP. All references to Adjusted results exclude restructuring charges and special items.
1  Current reporting period regulatory capital ratios are preliminary.
2  Capital adequacy and asset quality ratios calculated on a period-end basis, except net charge-offs.

 


Citizens Financial Group, Inc.

 

Discussion of Results:

Second quarter 2016 net income of $243 million improved from $223 million in first quarter 2016 and $190 million in second quarter 2015. Second quarter 2015 results were reduced by a net $40 million pre-tax, or $25 million after-tax, in restructuring charges and special items, largely related to efforts to improve processes and enhance efficiencies as well as rebranding and separation from RBS. Second quarter 2015 references to Adjusted* results below exclude the impact of restructuring charges and special items.

Second quarter 2016 net income of $243 million was up $20 million, or 9%, from first quarter 2016 as 4% revenue growth exceeded growth in noninterest expense of 2%. Diluted EPS growth of 12% reflects no preferred dividend in second quarter 2016.

Compared with second quarter 2015 levels, net income improved $53 million as revenue growth of $78 million was partially offset by a $26 million increase in income tax expense and a $13 million increase in provision, reflecting a reserve build largely tied to loan growth.

 

Restructuring charges and special items                         2Q16 change from  

($s in millions, except per share data)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Pre-tax restructuring charges and special items

   $  —         $  —         $ 40       $  —          NM      $ (40     NM   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

After-tax restructuring charges and special items

     —           —           25         —          NM        (25     NM   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Diluted EPS impact

   $  —         $  —         $ 0.05       $  —          NM      $ (0.05     NM   
Adjusted results*                         2Q16 change from  

($s in millions, except per share data)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Net interest income

   $ 923       $ 904       $ 840       $ 19        2   $ 83        10

Noninterest income

     355         330         360         25        8        (5     (1
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total revenue

     1,278         1,234         1,200         44        4        78        7   

Adjusted noninterest expense*

     827         811         801         16        2        26        3   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Adjusted pre-provision profit*

     451         423         399         28        7        52        13   

Provision for credit losses

     90         91         77         (1     (1     13        17   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Adjusted pretax income*

     361         332         322         29        9        39        12   

Adjusted income tax expense*

     118         109         107         9        8        11        10   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Adjusted net income*

   $ 243       $ 223       $ 215       $ 20        9   $ 28        13

Preferred dividend

     —           7         —           (7     (100     —          —    
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Adjusted net income available to common shareholders*

     243         216         215         27        13        28        13   

Adjusted diluted earnings per share*

   $ 0.46       $ 0.41       $ 0.40       $ 0.05        12   $ 0.06        15
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Compared to Adjusted* second quarter 2015 results, net income increased $28 million, or 13%. This reflects a $78 million increase in total revenue, partially offset by a $26 million increase in noninterest expense driven by higher salary and employee benefits expense related to the timing of merit increases and incentive payments, as well as higher provision expense. Adjusted diluted earnings per share were up 15%, reflecting a 13% increase in net income available to common shareholders and a 2% reduction in fully diluted shares outstanding.

 


Citizens Financial Group, Inc.

 

Net interest income                      2Q16 change from  

($s in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Interest income:

              

Interest and fees on loans and leases and loans held for sale

   $ 903      $ 872      $ 796      $ 31        4   $ 107        13

Investment securities

     141        145        155        (4     (3     (14     (9

Interest-bearing deposits in banks

     2        2        1        —          —         1        100   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total interest income

   $ 1,046      $ 1,019      $ 952      $ 27        3   $ 94        10
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Interest expense:

              

Deposits

   $ 63      $ 60      $ 60      $ 3        5   $ 3        5

Federal funds purchased and securities sold under agreements to repurchase

     —          1        2        (1     (100     (2     (100

Other short-term borrowed funds

     12        11        19        1        9        (7     (37

Long-term borrowed funds

     48        43        31        5        12        17        55   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total interest expense

   $ 123      $ 115      $ 112      $ 8        7   $ 11        10
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net interest income

   $ 923      $ 904      $ 840      $ 19        2   $ 83        10
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net interest margin

     2.84     2.86     2.72     (2 ) bps        12  bps   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net interest income of $923 million increased $19 million from first quarter 2016, driven by a 2% increase in average loans, partially offset by a two basis point decrease in net interest margin. Net interest margin of 2.84% in second quarter 2016 reflects the benefit of improved loan yields and portfolio mix, which was offset by a reduction in investment portfolio yield largely tied to lower long-term rates as well as higher borrowing costs related to senior bank debt issuance. Deposit costs remained relatively stable, reflecting continued pricing discipline.

Compared to second quarter 2015, net interest income increased $83 million, or 10%, largely reflecting 7% average loan growth, 6% average deposit growth and a 12 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 as well as increased borrowing costs related to senior bank debt issuance. Deposit costs were stable with second quarter 2015, with continued pricing discipline.

 


Citizens Financial Group, Inc.

 

Noninterest Income                         2Q16 change from  

($s in millions)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Service charges and fees

   $ 150       $ 144       $ 139       $ 6        4   $ 11        8

Card fees

     51         50         60         1        2        (9     (15

Trust and investment services fees

     38         37         41         1        3        (3     (7

Mortgage banking fees

     25         18         30         7        39        (5     (17

Capital markets fees

     35         22         30         13        59        5        17   

Foreign exchange and letter of credit fees

     21         21         22         —          —         (1     (5

Securities gains, net

     4         9         9         (5     (56     (5     (56

Other income1

     31         29         29         2        7        2        7   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Noninterest income

   $ 355       $ 330       $ 360       $ 25        8   $ (5     (1 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

1 Other income includes bank owned life insurance and other income.

Noninterest income of $355 million increased $25 million, or 8%, from first quarter 2016, largely driven by higher capital markets fees, mortgage banking fees and service charges and fees, partially offset by a $5 million reduction in securities gains. Capital markets fees increased $13 million, reflecting continued broadening of our capabilities and cross sell, as well as an increase in deal volume from lower first quarter 2016 market levels. Mortgage banking fees increased $7 million, reflecting higher application and origination volumes and improved sale volumes and spreads, as well as an improved mortgage servicing rights (“MSR”) valuation. Service charges and fees increased $6 million, largely reflecting the benefit of both higher volume from seasonally lower first quarter levels and improved pricing. Results also reflect modest growth in card fees, and trust and investment services fees and other income. Other income included strong interest rate product revenue, up $7 million, offset by an other-than-temporary-impairment (“OTTI”) charge of $6 million tied to a new model implementation. Securities gains decreased by $5 million.

Noninterest income decreased $5 million from second quarter 2015 levels that exclude the impact of $7 million of card reward costs. Service charges and fees increased $11 million, driven by both improved pricing and volume. Capital markets fees increased $5 million, reflecting continued broadening of our capabilities and cross sell, as well as increased market deal volume. Mortgage banking income declined $5 million from second quarter 2015 levels, reflecting the second quarter 2015 MSR valuation gain. Trust and investment services fees decreased $3 million given the changing mix of product sales.

 


Citizens Financial Group, Inc.

 

Noninterest expense                         2Q16 change from  

($s in millions)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Salaries and employee benefits

   $ 432       $ 425       $ 411       $ 7        2   $ 21        5

Outside services

     86         91         99         (5     (5     (13     (13

Occupancy

     76         76         90         —          —         (14     (16

Equipment expense

     64         65         65         (1     (2     (1     (2

Amortization of software

     41         39         37         2        5        4        11   

Other operating expense

     128         115         139         13        11        (11     (8
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total noninterest expense

   $ 827       $ 811       $ 841       $ 16        2   $ (14     (2 )% 

Restructuring charges and special items

     —           —           40         —          —       (40     (100 )% 
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total noninterest expense, excluding restructuring charges and special items*

   $ 827       $ 811       $ 801       $ 16        2   $ 26        3
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Noninterest expense of $827 million increased $16 million from first quarter 2016, driven by higher salaries and employee benefits, largely related to a change in timing of merit increases and incentive payments, and other operating expense driven by higher regulatory, fraud and insurance costs. Results also reflect lower outside services expense, driven by our ongoing efficiency initiatives.

Compared with second quarter 2015, noninterest expense decreased $14 million, or 2%, driven by a $40 million decrease in restructuring charges and special items. On an Adjusted* basis, results reflect an increase in salaries and employee benefits, largely reflecting a change in the timing of merit increases and incentive payments that drove higher payroll taxes and retirement plan contributions, as well as increased software amortization, partially offset by the card reward accounting change impact.

The effective tax rate improved to 32.6% in second quarter 2016 compared to 32.9% in first quarter 2016 and 32.7% in second quarter 2015.

 

Consolidated balance sheet review(1)                      2Q16 change from  

($s in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Total assets

   $ 145,183      $ 140,077      $ 137,251      $ 5,106        4   $ 7,932        6

Loans and leases and loans held for sale

     104,401        101,742        97,235        2,659        3        7,166        7   

Deposits

     106,257        102,606        100,615        3,651        4        5,642        6   

Average interest-earning assets (quarterly)

     129,492        126,165        123,205        3,327        3        6,287        5   

Stockholders’ equity

     20,226        19,965        19,586        261        1        640        3   

Stockholders’ common equity

     19,979        19,718        19,339        261        1        640        3   

Tangible common equity*

   $ 13,608      $ 13,333      $ 12,909      $ 275        2   $ 699        5

Loan-to-deposit ratio (period-end)(2)

     98.3     99.2     96.6     (91 ) bps        161  bps   

Common equity tier 1 capital ratio(3)

     11.5        11.6        11.8           

Total capital ratio(3)

     14.9     15.1     15.3        

 

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. Ratios also reflect the required U.S. Standardized methodology for calculating RWAs, effective January 1, 2015.

Total assets of $145.2 billion increased $5.1 billion, or 4%, from March 31, 2016, driven by a $2.2 billion increase in the investment portfolio, largely cash balances, which were managed temporarily higher in connection with the U.K. European Union exit vote (“Brexit”). Results also reflect a $1.6 billion increase in commercial loans and leases and a $975 million increase

 


Citizens Financial Group, Inc.

 

in retail loans driven by growth in residential mortgages and student, offset in part by a reduction in home equity balances. Compared with June 30, 2015, total assets increased $7.9 billion, or 6%, primarily reflecting a $7.0 billion increase in loans and leases and a $576 million increase in investment portfolio assets, largely interest-bearing cash positions.

Average interest-earning assets of $129.5 billion in second quarter 2016 increased $3.3 billion, or 3%, from the prior quarter, driven by a $2.1 billion increase in commercial loans and leases, a $324 million increase in retail loans, a $459 million increase in the investment portfolio and a $453 million increase in loans held for sale driven by the impact of the TDR Transaction.

Compared to second quarter 2015, average interest-earning assets increased $6.3 billion, or 5%, driven by commercial loan growth of $4.4 billion, retail loan growth of $2.6 billion and a $354 million increase in loans held for sale, partially offset by a $1.1 billion decrease in investments and interest-bearing cash.

 

Interest-earning assets                         2Q16 change from  

($s in millions)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Period-end interest-earning assets

                 

Investments and interest-bearing deposits

   $ 27,804       $ 25,607       $ 27,228       $ 2,197        9   $ 576        2

Loans and leases

                 

Commercial loans and leases

     49,557         47,972         45,068         1,585        3        4,489        10   

Retail loans

     53,994         53,019         51,470         975        2        2,524        5   

Total loans and leases

     103,551         100,991         96,538         2,560        3        7,013        7   

Loans held for sale, at fair value

     478         365         397         113        31        81        20   

Other loans held for sale

     372         386         300         (14     (4     72        24   

Total loans and leases and loans held for sale

     104,401         101,742         97,235         2,659        3        7,166        7   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total period-end interest-earning assets

   $ 132,205       $ 127,349       $ 124,463       $ 4,856        4   $ 7,742        6
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Average interest-earning assets

                 

Investments and interest-bearing deposits

   $ 26,007       $ 25,548       $ 27,145       $ 459        2   $ (1,138     (4 )% 

Loans and leases

                 

Commercial loans and leases

     49,134         47,043         44,696         2,091        4        4,438        10   

Retail loans

     53,543         53,219         50,910         324        1        2,633        5   

Total loans and leases

     102,677         100,262         95,606         2,415        2        7,071        7   

Loans held for sale, at fair value

     368         306         308         62        20        60        19   

Other loans held for sale

     440         49         146         391        NM       294        201   

Total loans and leases and loans held for sale

     103,485         100,617         96,060         2,868        3        7,425        8   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total average interest-earning assets

   $ 129,492       $ 126,165       $ 123,205       $ 3,327        3   $ 6,287        5
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Investments and interest-bearing deposits of $27.8 billion as of June 30, 2016 increased $2.2 billion, or 9%, from March 31, 2016, largely reflecting an increase in investments, mainly cash, which were managed temporarily higher in connection with Brexit. Compared with June 30, 2015, investments and interest-bearing deposits increased $576 million, or 2%, reflecting the impact of our Brexit planning, partially offset by modest third quarter 2015 balance sheet deleveraging. At the end of second quarter 2016, the average effective duration of the securities portfolio decreased to 2.4 years, compared with 2.9 years at March 31, 2016 and 3.7 years at June 30, 2015, largely reflecting continued declines in longer-term interest rates, which increased estimated prepayment speeds.

Period-end loans and leases of $103.6 billion at June 30, 2016 increased $2.6 billion from $101.0 billion at March 31, 2016 and increased $7.0 billion from $96.5 billion at June 30, 2015. The linked-quarter change was driven by a $1.6 billion increase in

 


Citizens Financial Group, Inc.

 

commercial loans and leases and a $975 million increase in retail loans. Compared with June 30, 2015, period-end loans and leases increased $7.0 billion, reflecting a $4.5 billion increase in commercial loans and leases and a $2.5 billion increase in retail loans.

Average loans and leases of $102.7 billion increased $2.4 billion from first quarter 2016, driven by a $2.1 billion increase in commercial and $324 million increase in retail loans. Commercial loan and lease growth reflects strength in Mid-corporate and Industry Verticals, Commercial Real Estate, Corporate Finance and Franchise Finance. Retail loan growth was primarily driven by student, other unsecured retail loans and mortgage, partially offset by lower home equity outstandings, including continued runoff in the non-core portfolio.

Compared with second quarter 2015, average loans and leases increased $7.1 billion, or 7%, reflecting a $4.4 billion increase in commercial and a $2.6 billion increase in retail. Commercial loan growth was driven by strength in Commercial Real Estate, Mid-corporate and Industry Verticals, Corporate Finance and Franchise Finance, partially offset by lower Middle Market loan balances. Retail loan growth was driven by strength in student, residential mortgages, auto and other unsecured retail loans, partially offset by lower home equity balances.

 

Deposits                         2Q16 change from  

($s in millions)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Period-end deposits

                 

Demand deposits

   $ 27,108       $ 27,186       $ 26,678       $ (78     —     $ 430        2

Checking with interest

     19,838         18,706         17,114         1,132        6        2,724        16   

Savings

     8,841         8,748         8,080         93        1        761        9   

Money market accounts

     37,503         35,513         35,735         1,990        6        1,768        5   

Term deposits

     12,967         12,453         13,008         514        4        (41     —    
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total period-end deposits

   $ 106,257       $ 102,606       $ 100,615       $ 3,651        4   $ 5,642        6
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Average deposits

                 

Demand deposits

   $ 27,448       $ 27,170       $ 26,419       $ 278        1   $ 1,029        4

Checking with interest

     19,003         17,993         16,561         1,010        6        2,442        15   

Savings

     8,762         8,394         8,076         368        4        686        8   

Money market accounts

     36,187         36,225         34,901         (38     —         1,286        4   

Term deposits

     12,581         12,199         12,576         382        3        5        —    
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total average deposits

   $ 103,981       $ 101,981       $ 98,533       $ 2,000        2   $ 5,448        6
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Period-end total deposits at June 30, 2016 of $106.3 billion increased $3.7 billion from March 31, 2016 as growth in money market, checking with interest and term deposits was partially offset by a decrease in demand deposits. Compared with June 30, 2015, period-end total deposits increased $5.6 billion, or 6%, driven by growth in checking with interest, money market, savings and demand deposits, partially offset by a reduction in term deposits.

Second quarter 2016 average deposits of $104.0 billion increased $2.0 billion from first quarter 2016, driven by growth in checking with interest, term deposits, savings and demand deposits. Compared with second quarter 2015, average deposits increased $5.4 billion driven by growth in checking with interest, money market, savings and demand deposits.

 


Citizens Financial Group, Inc.

 

Borrowed funds                         2Q16 change from  

($s in millions)

   2Q16      1Q16      2Q15      1Q16     2Q15  
                          $     %     $     %  

Period-end borrowed funds

                 

Federal funds purchased and securities sold under agreements to repurchase

   $ 717       $ 714       $ 3,784       $ 3        —     $ (3,067     (81 )% 

Other short-term borrowed funds

     2,770         3,300         6,762         (530     (16     (3,992     (59

Long-term borrowed funds

     11,810         10,035         3,890         1,775        18        7,920        204   
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total borrowed funds

   $ 15,297       $ 14,049       $ 14,436       $ 1,248        9   $ 861        6
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Average borrowed funds

   $ 15,038       $ 13,873       $ 14,772       $ 1,165        8   $ 266        2
  

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total borrowed funds of $15.3 billion at June 30, 2016 increased $1.2 billion from March 31, 2016, largely reflecting the issuance of $1.0 billion of senior unsecured bank debt and shift from short-term to long-term Federal Home Loan Bank (“FHLB”) advances. Compared with June 30, 2015, total borrowed funds increased $861 million, largely reflecting the issuance of senior unsecured bank debt and an increase in long-term FHLB advances, which more than offset continued reductions in our reliance on short-term borrowings.

Average borrowed funds of $15.0 billion increased $1.2 billion from first quarter 2016 and $266 million from second quarter 2015. On May 13, 2016, we issued $1.0 billion in five-year 2.550% senior unsecured bank notes.

 

Capital(1)                      2Q16 change from  

($s and shares in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Period-end capital

              

Stockholders’ equity

   $ 20,226      $ 19,965      $ 19,586      $ 261        1   $ 640        3

Stockholders’ common equity

     19,979        19,718        19,339        261        1        640        3   

Tangible common equity*

     13,608        13,333        12,909        275        2        699        5   

Tangible common equity per share*

   $ 25.72      $ 25.21      $ 24.03      $ 0.51        2        1.69        7   

Common shares - at end of period

     529.1        528.9        537.1        0.2        —         (8.1     (1

Common shares - average (diluted)

     530.4        530.4        539.9        (0.1     —       (9.5     (2 )% 

Common equity tier 1 capital ratio(1)(2)

     11.5     11.6     11.8        

Total capital ratio(1)(2)

     14.9        15.1        15.3           

Tier 1 leverage ratio(1)(2)

     10.3     10.4     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. Ratios also reflect the required U.S. Standardized methodology for calculating RWAs, effective January 1, 2015.

On June 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 11.5% and a total capital ratio of 14.9%. 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. The second quarter 2016 dividend per common share increased 20% to $0.12 from $0.10 in first quarter 2016.

On June 29, 2016, Citizens announced that the Federal Reserve had no objection to its 2016 Capital Plan (the “Plan”) submitted in connection with the Federal Reserve’s 2016 Comprehensive Capital Analysis and Review. 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

 


Citizens Financial Group, Inc.

 

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                      2Q16 change from  

($s in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Nonperforming loans and leases

   $ 1,044      $ 1,079      $ 1,050      $ (35     (3 )%    $ (6     (1 )% 

Net charge-offs

     65        83        78        (18     (22     (13     (17

Provision for credit losses

     90        91        77        (1     (1     13        17   

Allowance for loan and lease losses

   $ 1,246      $ 1,224      $ 1,201      $ 22        2   $ 45        4

Total nonperforming loans and leases as a % of total loans and leases

     1.01     1.07     1.09     (6 ) bps        (8 ) bps   

Net charge-offs as % of total loans and leases

     0.25        0.33        0.33        (8 ) bps        (8 ) bps   

Allowance for loan and lease losses as a % of nonperforming loans and leases

     119.3     113.4     114.4     584   bps        490   bps   

Credit quality metrics improved during the quarter, reflecting a reduction in net charge-offs and improving commercial and retail credit quality. Nonperforming loans and leases of $1.0 billion at June 30, 2016 decreased $35 million from March 31, 2016, reflecting improvement in commercial and retail categories. The nonperforming loans and leases to total loans and leases ratio of 1.01% at June 30, 2016 improved 6 basis points from 1.07% at March 31, 2016 and 8 basis points from 1.09% at June 30, 2015. Compared with second quarter 2015, nonperforming loans and leases decreased $6 million.

Net charge-offs of $65 million, or 25 basis points, of total average loans and leases in second quarter 2016 decreased $18 million from $83 million, or 33 basis points, in first quarter 2016. Retail product net charge-offs of $63 million were $11 million lower than first quarter 2016 levels. Commercial net charge-offs were $2 million in second quarter 2016 compared with commercial net charge-offs of $9 million in first quarter 2016.

Allowance for loan and lease losses of $1.2 billion increased $22 million, or 2%, versus first quarter 2016 and $45 million, or 4%, from second quarter 2015, largely reflecting continued loan growth.

Allowance for loan and lease losses to total loans and leases was 1.20% as of June 30, 2016, relatively stable compared with 1.21% as of March 31, 2016 and 1.24% as of June 30, 2015. The allowance for loan and lease losses to nonperforming loans and leases ratio increased to 119% as of June 30, 2016 from 113% as of March 31, 2016 and 114% as of June 30, 2015.

 


Citizens Financial Group, Inc.

 

Additional Segment Detail:

 

Consumer Banking Segment                      2Q16 change from  

($s in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Net interest income

   $ 602      $ 581      $ 544      $ 21        4   $ 58        11

Noninterest income

     219        208        230        11        5        (11     (5
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total revenue

     821        789        774        32        4        47        6   

Noninterest expense

     632        616        613        16        3        19        3   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Pre-provision profit

     189        173        161        16        9        28        17   

Provision for credit losses

     49        63        60        (14     (22     (11     (18
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Income before income tax expense

     140        110        101        30        27        39        39   

Income tax expense

     50        39        35        11        28        15        43   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income

   $ 90      $ 71      $ 66      $ 19        27   $ 24        36
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Average balances

              

Total loans and leases (1)

   $ 54,353      $ 53,744      $ 51,024      $ 609        1   $ 3,329        7

Total deposits

     71,863        70,871        69,963        992        1     1,900        3
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Key metrics

              

ROTCE (2)*

     7.1     5.6     5.7     150   bps        143   bps   

Efficiency ratio*

     77     78     79     (110 ) bps        (227 ) bps   

Loan-to-deposit ratio (period-end)(1)

     76.1     74.7     73.2     131   bps       285   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 $90 million in second quarter 2016 increased $19 million, or 27%, compared to first quarter 2016, reflecting a $32 million increase in total revenue and lower provision for credit losses, partially offset by higher noninterest expense. Net interest income increased $21 million, or 4%, from first quarter 2016, driven by a $538 million increase in average loans led by higher student and mortgage loan balances and improved loan and deposit spreads. Noninterest income increased $11 million, or 5%, from first quarter 2016, driven by higher mortgage banking fees, reflecting higher application and origination volumes and improved sale gains and spreads, as well as improved MSR valuations and higher service charges and fees. Results also reflect improved card fees and trust and investment services fees. Noninterest expense increased $16 million, or 3%, from first quarter 2016, reflecting higher salary and benefits expense related to timing of merit increases and incentive payments, higher regulatory, fraud and insurance costs and higher outside services expense. Provision for credit losses of $49 million decreased $14 million from first quarter 2016, driven by lower net charge-offs in auto and home equity.

Compared with second quarter 2015, net income increased $24 million, or 36%, as revenue growth and lower provision for credit losses was partially offset by an increase in noninterest expense. Net interest income increased $58 million, or 11%, driven by the benefit of a $3.3 billion increase in average loans, reflecting growth in student, mortgage, auto and consumer unsecured loans and improved deposit spreads. Noninterest income decreased $11 million, or 5%, as an increase in service charges and fees was more than offset by a reduction in card fees tied to the card reward accounting change. Results also reflect lower mortgage banking fees, which declined $5 million from second quarter 2015 levels, as the benefit of higher application volumes and sale gains and spreads was more than offset by a reduction in MSR valuations from higher first quarter

 


Citizens Financial Group, Inc.

 

2015 levels, reflecting the reduction in long-term rates. Noninterest expense increased $19 million, or 3%, driven by higher salaries and benefits largely related to a change in the timing of merit increases and incentive payments. Results also reflect an increase in outside services expense, largely offset by the card reward accounting change impact. Provision for credit losses declined $11 million from second quarter 2015, driven by lower net charge-offs in home equity.

 

Commercial Banking Segment                      2Q16 change from  

($s in millions)

   2Q16     1Q16     2Q15     1Q16     2Q15  
                       $     %     $     %  

Net interest income

   $ 314      $ 300      $ 286      $ 14        5   $ 28        10

Noninterest income

     122        99        108        23        23        14        13   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total revenue

     436        399        394        37        9        42        11   

Noninterest expense

     186        187        181        (1     (1     5        3   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Pre-provision profit

     250        212        213        38        18        37        17   

Provision for credit losses

     (1     9        7        (10     (111     (8     (114
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Income before income tax expense

     251        203        206        48        24        45        22   

Income tax expense

     87        70        71        17        24        16        23   
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income

   $ 164      $ 133      $ 135      $ 31        23   $ 29        21
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Average balances

              

Total loans and leases (1)

   $ 46,073      $ 43,899      $ 41,467      $ 2,174        5   $ 4,606        11

Total deposits

     25,113        24,833        22,717        280        1     2,396        11
  

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Key metrics

              

ROTCE (2)*

     13.0     11.2     11.7     185   bps        135   bps   

Efficiency ratio*

     43     47     46     (386 ) bps        (319 ) bps   

Loan-to-deposit ratio (period-end)(1)

     172.6     185.1     176.2     (1,249 ) bps        (352 ) 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 $164 million in second quarter 2016 increased $31 million, or 23%, from first quarter 2016, reflecting a $37 million increase in total revenues and lower provision expense. Net interest income of $314 million increased $14 million compared to first quarter 2016, driven by loan growth and higher interest recoveries. Average loans and leases increased $2.1 billion led by Mid-corporate and Industry Verticals, Corporate Finance and Commercial Real Estate. Noninterest income increased $23 million, driven by strength in capital markets and interest rate products. Noninterest expense was flat as higher salaries and employee benefits, which included a change in timing of merit and incentive payments, and higher insurance costs were offset by lower outside services expense. Provision for credit losses decreased $10 million from first quarter levels, reflecting lower net charge-offs.

Compared to second quarter 2015, net income increased $29 million, or 21%, as a $42 million increase in total revenue and loan recoveries was partially offset by a $5 million increase in noninterest expense. Net interest income increased $28 million, or 10%, from second quarter 2015, reflecting the benefit of a $4.6 billion increase in average loans and leases, improved deposit spreads and a $2.4 billion increase in average deposits. Average loan and lease growth was driven by strength in Commercial Real Estate, Mid-corporate and Industry Verticals, Corporate Finance and Franchise Finance. Noninterest income increased $14 million from second quarter 2015 levels, reflecting strength in service charges and fees, interest rate products

 


Citizens Financial Group, Inc.

 

and capital markets fees. Noninterest expense increased $5 million from second quarter 2015 as increased salaries and employee benefits related to the timing of merit increases and incentive payments and higher insurance costs were partially offset by lower outside services. Provision for credit losses decreased $8 million from second quarter 2015 levels, reflecting lower charge-offs.

 

Other(1)                       2Q16 change from  

($s in millions)

   2Q16     1Q16      2Q15     1Q16     2Q15  
                        $     %     $     %  

Net interest income

   $ 7      $ 23       $ 10      $ (16     (70 )%    $ (3     (30 )% 

Noninterest income

     14        23         22        (9     (39     (8     (36
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

Total revenue

     21        46         32        (25     (54     (11     (34

Noninterest expense

     9        8         47        1        13        (38     (81
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

Pre-provision profit (loss)

     12        38         (15     (26     (68     27        180   

Provision for credit losses

     42        19         10        23        121        32        NM  
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

Income (loss) before income tax expense (benefit)

     (30     19         (25     (49     NM       (5     (20

Income tax expense (benefit)

     (19     —           (14     (19     NM       (5     (36
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

Net income (loss)

   $ (11   $ 19       $ (11   $ (30     (158 )%    $ —          —  
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

Average balances

               

Total loans and leases (2)

   $ 3,059      $ 2,974       $ 3,569      $ 85        3   $ (510     (14 )% 

Total deposits

     7,005        6,277         5,853        728        12     1,152        20
  

 

 

   

 

 

    

 

 

   

 

 

     

 

 

   

 

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 a net loss of $11 million in second quarter 2016 compared to net income of $19 million in first quarter 2016. This decrease was largely driven by higher provision for credit losses, which included a $25 million reserve build and higher non-core net charge-offs. Net interest income of $7 million decreased $16 million from first quarter 2016, largely reflecting higher borrowing costs related to term-debt issuance, lower residual funds transfer pricing, investment portfolio income and non-core loan interest. Noninterest income of $14 million decreased $9 million from first quarter 2016, largely reflecting lower securities gains and higher OTTI charges. Noninterest expense remained relatively stable. Provision for credit losses of $42 million in second quarter 2016 included a $25 million reserve build, compared with $19 million of provision for credit losses in first quarter 2016, which included an $8 million reserve build. Provision for credit losses within Other mainly represents the residual change in the consolidated allowance for credit losses after attributing the respective net charge-offs to the Consumer Banking and Commercial Banking segments, while also factoring in net charge-offs related to the non-core portfolio.

Other net loss in second quarter 2016 was flat with second quarter 2015, reflecting the lack of restructuring charges and special items, offset by lower revenue and an increase in provision for credit losses, which reflects a $25 million reserve build compared to a $1 million reserve release in second quarter 2015.

 


Citizens Financial Group, Inc.

 

Non-GAAP Financial Measures

This document contains non-GAAP financial measures. The table below presents reconciliations of certain non-GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are 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.

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”, “salaries and employee benefits”, “outside services”, “occupancy”, “equipment expense”, “other operating expense”, “net income per average common share”, “return on average common equity” and “return on average total assets”.” In addition, we present computations for “tangible book value per common share”, “return on average tangible common equity”, “return on average total tangible assets”, “efficiency ratio”, “pro forma Basel III fully phased-in common equity tier 1 capital”, “operating leverage”, “noninterest income before accounting change” and “card fee income before accounting change” as part of our non-GAAP measures.

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 and special 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 and special items. We believe this presentation also increases comparability of period-to-period results.

We also consider pro forma capital ratios defined by banking regulators but not effective at each period end to be non-GAAP financial measures. Since analysts and banking regulators may assess our capital adequacy using these pro forma ratios, we believe they are useful to provide investors the ability to assess our capital adequacy on the same basis.

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.

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Excluding restructuring charges and special items)

($s in millions, except per share data)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS
ENDED JUNE 30,
    FOR THE YEAR
ENDED DECEMBER 30,
 
        2Q16     1Q16     4Q15     3Q15     2Q15     2016     2015     2015     2014  

Noninterest income, excluding special items:

                   

Noninterest income (GAAP)

    $ 355      $ 330      $ 362      $ 353      $ 360      $ 685      $ 707       

Less: Special items

      —          —          —          —          —          —          —         
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Noninterest income, excluding special items (non-GAAP)

    $ 355      $ 330      $ 362      $ 353      $ 360      $ 685      $ 707       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Total revenue, excluding special items:

                   

Total revenue (GAAP)

      A       $ 1,278      $ 1,234      $ 1,232      $ 1,209      $ 1,200      $ 2,512      $ 2,383      $ 4,824      $ 4,979   

Less: Special items

      —          —          —          —          —          —          —          —          288   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue, excluding special items (non-GAAP)

  B   $ 1,278      $ 1,234      $ 1,232      $ 1,209      $ 1,200      $ 2,512      $ 2,383      $ 4,824      $ 4,691   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense, excluding restructuring charges and special items:

                   

Noninterest expense (GAAP)

  C   $ 827      $ 811      $ 810      $ 798      $ 841      $ 1,638      $ 1,651      $ 3,259      $ 3,392   

Less: Restructuring charges and special items

      —          —          —          —          40        —          50        50        169   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Noninterest expense, excluding restructuring charges and special items (non-GAAP)

  D   $ 827      $ 811      $ 810      $ 798      $ 801      $ 1,638      $ 1,601      $ 3,209      $ 3,223   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pre-provision profit, excluding restructuring charges and special items:

                   

Total revenue, excluding restructuring charges and special items (non-GAAP)

    $ 1,278      $ 1,234      $ 1,232      $ 1,209      $ 1,200      $ 2,512      $ 2,383       

Less: Noninterest expense, excluding restructuring charges and special items (non-GAAP)

      827        811        810        798        801        1,638        1,601       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Pre-provision profit, excluding restructuring charges and special items (non-GAAP)

    $ 451      $ 423      $ 422      $ 411      $ 399      $ 874      $ 782       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income before income tax expense, excluding restructuring charges and special items:

                   

Income before income tax expense (GAAP)

    $ 361      $ 332      $ 331      $ 335      $ 282      $ 693      $ 597       

Less: Income before income tax expense (benefit) related to restructuring charges and special items (GAAP)

      —          —          —          —          (40     —          (50    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income before income tax expense, excluding restructuring charges and special items (non-GAAP)

    $ 361      $ 332      $ 331      $ 335      $ 322      $ 693      $ 647       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income tax expense, excluding restructuring charges and special items:

                   

Income tax expense (GAAP)

    $ 118      $ 109      $ 110      $ 115      $ 92      $ 227      $ 198       

Less: Income tax (benefit) related to restructuring charges and special items (GAAP)

      —          —          —          —          (15     —          (19    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Income tax expense, excluding restructuring charges and special items (non-GAAP)

    $ 118      $ 109      $ 110      $ 115      $ 107      $ 227      $ 217       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net income, excluding restructuring charges and special items:

                   

Net income (GAAP)

  E   $ 243      $ 223      $ 221      $ 220      $ 190      $ 466      $ 399       

Add: Restructuring charges and special items, net of income tax expense (benefit)

      —          —          —          —          25        —          31       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net income, excluding restructuring charges and special items (non-GAAP)

  F   $ 243      $ 223      $ 221      $ 220      $ 215      $ 466      $ 430       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net income available to common stockholders (GAAP), excluding restructuring charges and special items:

                   

Net income available to common stockholders (GAAP)

  G   $ 243      $ 216      $ 221      $ 213      $ 190      $ 459      $ 399       

Add: Restructuring charges and special items, net of income tax expense (benefit)

      —          —          —          —          25        —          31       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Net income available to common stockholders, excluding restructuring charges and special items (non-GAAP)

  H   $ 243      $ 216      $ 221      $ 213      $ 215      $ 459      $ 430       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Return on average common equity, excluding restructuring charges and special items:

                   

Average common equity (GAAP)

  I   $ 19,768      $ 19,567      $ 19,359      $ 19,261      $ 19,391      $ 19,667      $ 19,399       

Return on average common equity, excluding restructuring charges and special items (non-GAAP)

  H/I     4.94     4.45     4.51     4.40     4.45     4.70     4.47    

Return on average tangible common equity and return on average tangible common equity, excluding restructuring charges and special items:

                   

Average common equity (GAAP)

  I   $ 19,768      $ 19,567      $ 19,359      $ 19,261      $ 19,391      $ 19,667      $ 19,399       

Less: Average goodwill (GAAP)

      6,876        6,876        6,876        6,876        6,876        6,876        6,876       

Less: Average other intangibles (GAAP)

      2        3        3        4        5        2        5       

Add: Average deferred tax liabilities related to goodwill (GAAP)

      496        481        468        453        437        488        430       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Average tangible common equity (non-GAAP)

  J   $ 13,386      $ 13,169      $ 12,948      $ 12,834      $ 12,947      $ 13,277      $ 12,948       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Return on average tangible common equity (non-GAAP)

  G/J     7.30     6.61     6.75     6.60     5.90     6.96     6.21    

Return on average tangible common equity, excluding restructuring charges and special items (non-GAAP)

  H/J     7.30     6.61     6.75     6.60     6.67     6.96     6.70    

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Excluding restructuring charges and special items)

($s in millions, except per share data)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS
ENDED JUNE 30,
    FOR THE YEAR
ENDED DECEMBER 30,
 
        2Q16     1Q16     4Q15     3Q15     2Q15     2016     2015     2015     2014  

Return on average total assets, excluding restructuring charges and special items:

                   

Average total assets (GAAP)

    K     $ 142,179      $ 138,780      $ 136,298      $ 135,103      $ 135,521      $ 140,479      $ 134,429       

Return on average total assets, excluding restructuring charges and special items (non-GAAP)

    F/K       0.69     0.65     0.64     0.65     0.64     0.67     0.65    

Return on average total tangible assets and return on average total tangible assets, excluding restructuring charges and special items:

                   

Average total assets (GAAP)

  K   $ 142,179      $ 138,780      $ 136,298      $ 135,103      $ 135,521      $ 140,479      $ 134,429       

Less: Average goodwill (GAAP)

      6,876        6,876        6,876        6,876        6,876        6,876        6,876       

Less: Average other intangibles (GAAP)

      2        3        3        4        5        2        5       

Add: Average deferred tax liabilities related to goodwill (GAAP)

      496        481        468        453        437        488        430       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Average tangible assets (non-GAAP)

  L   $ 135,797      $ 132,382      $ 129,887      $ 128,676      $ 129,077      $ 134,089      $ 127,978       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Return on average total tangible assets (non-GAAP)

  E/L     0.72     0.68     0.67     0.68     0.59     0.70     0.63    

Return on average total tangible assets, excluding restructuring charges and special items (non-GAAP)

  F/L     0.72     0.68     0.67     0.68     0.67     0.70     0.68    

Efficiency ratio and efficiency ratio, excluding restructuring charges and special items:

                   

Efficiency ratio (non-GAAP)

  C/A     64.71     65.66     65.76     66.02     70.02     65.18     69.27     67.56     68.12

Efficiency ratio, excluding restructuring charges and special items (non-GAAP)

  D/B     64.71     65.66     65.76     66.02     66.70     65.18     67.17     66.52     68.70

Tangible book value per common share:

                   

Common shares - at end of period (GAAP)

  M     529,094,976        528,933,727        527,774,428        527,636,510        537,149,717        529,094,976        537,149,717       

Common stockholders’ equity (GAAP)

    $ 19,979      $ 19,718      $ 19,399      $ 19,353      $ 19,339      $ 19,979      $ 19,339       

Less: Goodwill (GAAP)

      6,876        6,876        6,876        6,876        6,876        6,876        6,876       

Less: Other intangible assets (GAAP)

      2        3        3        3        4        2        4       

Add: Deferred tax liabilities related to goodwill (GAAP)

      507        494        480        465        450        507        450       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Tangible common equity (non-GAAP)

  N   $ 13,608      $ 13,333      $ 13,000      $ 12,939      $ 12,909      $ 13,608      $ 12,909       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Tangible book value per common share (non-GAAP)

  N/M   $ 25.72      $ 25.21      $ 24.63      $ 24.52      $ 24.03      $ 25.72      $ 24.03       

Net income per average common share - basic and diluted, excluding restructuring charges and special items:

                   

Average common shares outstanding - basic (GAAP)

  O     528,968,330        528,070,648        527,648,630        530,985,255        537,729,248        528,519,489        541,986,653       

Average common shares outstanding - diluted (GAAP)

  P     530,365,203        530,446,188        530,275,673        533,398,158        539,909,366        530,396,871        544,804,268       

Net income available to common stockholders (GAAP)

  G   $ 243      $ 216      $ 221      $ 213      $ 190      $ 459      $ 399       

Net income per average common share - basic (GAAP)

  G/O     0.46        0.41        0.42        0.40        0.35        0.87        0.74       

Net income per average common share - diluted (GAAP)

  G/P     0.46        0.41        0.42        0.40        0.35        0.87        0.73       

Net income available to common stockholders, excluding restructuring charges and special items (non-GAAP)

  H     243        216        221        213        215        459        430       

Net income per average common share - basic, excluding restructuring charges and special items (non-GAAP)

  H/O     0.46        0.41        0.42        0.40        0.40        0.87        0.79       

Net income per average common share - diluted, excluding restructuring charges and special items (non-GAAP)

  H/P     0.46        0.41        0.42        0.40        0.40        0.87        0.79       

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Excluding restructuring charges and special items)

($s in millions)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS
ENDED JUNE 30,
 
        2Q16     1Q16     4Q15     3Q15     2Q15     2016     2015  

Pro forma Basel III fully phased-in common equity tier 1 capital ratio1:

               

Common equity tier 1 (regulatory)

    $ 13,768      $ 13,570      $ 13,389      $ 13,200      $ 13,270       

Less: Change in DTA and other threshold deductions (GAAP)

      1        1        2        2        3       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Pro forma Basel III fully phased-in common equity tier 1 (non-GAAP)

  Q   $ 13,767      $ 13,569      $ 13,387      $ 13,198      $ 13,267       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Risk-weighted assets (regulatory general risk weight approach)

    $ 119,492      $ 116,591      $ 114,084      $ 112,277      $ 112,131       

Add: Net change in credit and other risk-weighted assets (regulatory)

      228        232        244        243        247       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Basel III standardized approach risk-weighted assets (non-GAAP)

  R   $ 119,720      $ 116,823      $ 114,328      $ 112,520      $ 112,378       
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

Pro forma Basel III fully phased-in common equity tier 1 capital ratio (non-GAAP)1

    Q/R       11.5     11.6     11.7     11.7     11.8    

Salaries and employee benefits, excluding restructuring charges and special items:

               

Salaries and employee benefits (GAAP)

    $ 432      $ 425      $ 402      $ 404      $ 411      $ 857      $ 830   

Less: Restructuring charges and special items

      —          —          (2     —          6        —          5   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Salaries and employee benefits, excluding restructuring charges and special items (non-GAAP)

    $ 432      $ 425      $ 404      $ 404      $ 405      $ 857      $ 825   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outside services, excluding restructuring charges and special items:

               

Outside services (GAAP)

    $ 86      $ 91      $ 104      $ 89      $ 99      $ 177      $ 178   

Less: Restructuring charges and special items

      —          —          2        —          16        —          24   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Outside services, excluding restructuring charges and special items (non-GAAP)

    $ 86      $ 91      $ 102      $ 89      $ 83      $ 177      $ 154   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy, excluding restructuring charges and special items:

               

Occupancy (GAAP)

    $ 76      $ 76      $ 74      $ 75      $ 90      $ 152      $ 170   

Less: Restructuring charges and special items

      —          —          —          —          15        —          17   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Occupancy, excluding restructuring charges and special items (non-GAAP)

    $ 76      $ 76      $ 74      $ 75      $ 75      $ 152      $ 153   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equipment expense, excluding restructuring charges and special items:

               

Equipment expense (GAAP)

    $ 64      $ 65      $ 67      $ 62      $ 65      $ 129      $ 128   

Less: Restructuring charges and special items

      —          —          —          —          —          —          1   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equipment expense, excluding restructuring charges and special items (non-GAAP)

    $ 64      $ 65      $ 67      $ 62      $ 65      $ 129      $ 127   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other operating expense, excluding restructuring charges and special items:

               

Other operating expense (GAAP)

    $ 128      $ 115      $ 125      $ 133      $ 139      $ 243      $ 272   

Less: Restructuring charges and special items

      —          —          —          —          3        —          3   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other operating expense, excluding restructuring charges and special items (non-GAAP)

    $ 128      $ 115      $ 125      $ 133      $ 136      $ 243      $ 269   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges and special expense items include:

               

Restructuring charges

    $ 0      $ 0      $ 0      $ 0      $ 25      $ 0      $ 26   

Special items

      —          —          —          —          15        —          24   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring charges and special expense items before income tax expense

    $ 0      $ 0      $ 0      $ 0      $ 40      $ 0      $ 50   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

    

                                      2Q16 vs 1Q16     2Q16 vs 2Q15  
      $ Change     $ Change  

Noninterest income:

               

Noninterest income (GAAP)

    $ 355            $ 360      ($ 5     (1 )% 

Add: Reward accounting change

      10              —          10        NM   
   

 

 

         

 

 

   

 

 

   

 

 

 

Noninterest income, before accounting change (non-GAAP)

    $ 365            $ 360      $ 5        1
   

 

 

         

 

 

   

 

 

   

 

 

 

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(Excluding restructuring charges and special items)

($s in millions, except per share data)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS
ENDED JUNE 30,
    2Q16 vs 1Q16     2Q16 vs 2Q15  
        2Q16     1Q16     4Q15     3Q15     2Q15     2016     2015     % Change     % Change  

Operating leverage:

                   

Total revenue (GAAP)

      A       $ 1,278      $ 1,234          $ 1,200      $ 2,512      $ 2,383        3.6     6.5

Noninterest expense (GAAP)

  C   $ 827      $ 811          $ 841      $ 1,638      $ 1,651        2.0     (1.7 )% 
                 

 

 

   

 

 

 

Operating leverage (non-GAAP)

                    1.6     8.2
                 

 

 

   

 

 

 

Operating leverage, excluding restructuring charges and special items:

                   

Total revenue, excluding restructuring charges and special items (non-GAAP)

  B   $ 1,278      $ 1,234          $ 1,200      $ 2,512      $ 2,383        3.6     6.5

Less: Noninterest expense, excluding restructuring charges and special items (non-GAAP)

  D   $ 827      $ 811          $ 801      $ 1,638      $ 1,601        2.0     3.2
                 

 

 

   

 

 

 

Operating leverage, excluding restructuring charges and special items: (non-GAAP)

                    1.6     3.3
                 

 

 

   

 

 

 
        HALF YEAR TRENDS     1H16 vs 1H15     2H15 vs 2H14     1H15 vs 1H14        
        1H14     2H14     1H15     2H15     1H16     % Change     % Change     % Change        

Operating leverage:

                   

Total revenue (GAAP)

    $ 2,639      $ 2,340      $ 2,383      $ 2,441      $ 2,512        5.4     4.3     (9.7 )%   

Noninterest expense (GAAP)

    $ 1,758      $ 1,634      $ 1,651      $ 1,608      $ 1,638        (0.8 )%      (1.6 )%      (6.1 )%   
             

 

 

   

 

 

   

 

 

   

Operating leverage (non-GAAP)

                6.2     5.9     (3.6 )%   
             

 

 

   

 

 

   

 

 

   

Operating leverage, excluding restructuring charges and special items:

                   

Total revenue, excluding restructuring charges and special items (non-GAAP)

    $ 2,351      $ 2,340      $ 2,383      $ 2,441      $ 2,512        5.4     4.3     1.4  

Less: Noninterest expense, excluding restructuring charges and special items (non-GAAP)

    $ 1,643      $ 1,579      $ 1,601      $ 1,608      $ 1,638        2.3     1.8     (2.6 )%   
             

 

 

   

 

 

   

 

 

   

Operating leverage, excluding restructuring charges and special items: (non-GAAP)

                3.1     2.5     3.9  
             

 

 

   

 

 

   

 

 

   

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS - SEGMENTS

(dollars in millions)

 

        THREE MONTHS ENDED JUNE 30,     THREE MONTHS ENDED MARCH 31,  
        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   $ 90      $ 164      ($ 11   $ 243      $ 71      $ 133      $ 19      $ 223   

Less: Preferred stock dividends

      —          —          —          —          —          —          7        7   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

  B   $ 90      $ 164      ($ 11   $ 243      $ 71      $ 133      $ 12      $ 216   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity:

                 

Average common equity (GAAP)

    $ 5,110      $ 5,040      $ 9,618      $ 19,768      $ 5,089      $ 4,790      $ 9,688      $ 19,567   

Less: Average goodwill (GAAP)

      —          —          6,876        6,876        —          —          6,876        6,876   

Average other intangibles (GAAP)

      —          —          2        2        —          —          3        3   

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          496        496        —          —          481        481   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity (non-GAAP)

  C   $ 5,110      $ 5,040      $ 3,236      $ 13,386      $ 5,089      $ 4,790      $ 3,290      $ 13,169   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity (non-GAAP):

    B/C       7.09     13.04     NM        7.30     5.59     11.19     NM        6.61

Return on average total tangible assets:

                 

Average total assets (GAAP)

    $ 55,660      $ 47,388      $ 39,131      $ 142,179      $ 55,116      $ 45,304      $ 38,360      $ 138,780   

Less: Average goodwill (GAAP)

      —          —          6,876        6,876        —          —          6,876        6,876   

Average other intangibles (GAAP)

      —          —          2        2        —          —          3        3   

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          496        496        —          —          481        481   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets (non-GAAP)

  D   $ 55,660      $ 47,388      $ 32,749      $ 135,797      $ 55,116      $ 45,304      $ 31,962      $ 132,382   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets (non-GAAP)

  A/D     0.65     1.39     NM        0.72     0.52     1.18     NM        0.68

Efficiency ratio:

                 

Noninterest expense (GAAP)

  E   $ 632      $ 186      $ 9      $ 827      $ 616      $ 187      $ 8      $ 811   

Net interest income (GAAP)

      602        314        7        923        581        300        23        904   

Noninterest income (GAAP)

      219        122        14        355        208        99        23        330   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  F   $ 821      $ 436      $ 21      $ 1,278      $ 789      $ 399      $ 46      $ 1,234   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio (non-GAAP)

  E/F     76.98     42.88     NM        64.71     78.08     46.74     NM        65.66
       

 

THREE MONTHS ENDED DECEMBER 31,

    THREE MONTHS ENDED SEPTEMBER 30,  
        2015     2015  
        Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated  

Net income available to common stockholders:

                 

Net income (loss) (GAAP)

  A   $ 67      $ 152      $ 2      $ 221      $ 68      $ 145      $ 7      $ 220   

Less: Preferred stock dividends

      —          —          —          —          —          —          7        7   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

  B   $ 67      $ 152      $ 2      $ 221      $ 68      $ 145      $ —        $ 213   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity:

                 

Average common equity (GAAP)

    $ 4,831      $ 4,787      $ 9,741      $ 19,359      $ 4,791      $ 4,722      $ 9,748      $ 19,261   

Less: Average goodwill (GAAP)

      —          —          6,876        6,876        —          —          6,876        6,876   

Average other intangibles (GAAP)

      —          —          3        3        —          —          4        4   

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          468        468        —          —          453        453   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity (non-GAAP)

  C   $ 4,831      $ 4,787      $ 3,330      $ 12,948      $ 4,791      $ 4,722      $ 3,321      $ 12,834   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity (non-GAAP):

  B/C     5.50     12.57     NM        6.75     5.67     12.24     NM        6.60

Return on average total tangible assets:

                 

Average total assets (GAAP)

    $ 54,065      $ 43,835      $ 38,398      $ 136,298      $ 53,206      $ 43,113      $ 38,784      $ 135,103   

Less: Average goodwill (GAAP)

      —          —          6,876        6,876        —          —          6,876        6,876   

Average other intangibles (GAAP)

      —          —          3        3        —          —          4        4   

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          468        468        —          —          453        453   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets (non-GAAP)

  D   $ 54,065      $ 43,835      $ 31,987      $ 129,887      $ 53,206      $ 43,113      $ 32,357      $ 128,676   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets (non-GAAP)

  A/D     0.49     1.37     NM        0.67     0.51     1.34     NM        0.68

Efficiency ratio:

                 

Noninterest expense (GAAP)

  E   $ 624      $ 180      $ 6      $ 810      $ 623      $ 175      $ —        $ 798   

Net interest income (GAAP)

      565        301        4        870        556        299        1        856   

Noninterest income (GAAP)

      226        107        29        362        235        100        18        353   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  F   $ 791      $ 408      $ 33      $ 1,232      $ 791      $ 399      $ 19      $ 1,209   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio (non-GAAP)

  E/F     78.85     44.02     NM        65.76     78.72     43.75     NM        66.02
       

 

THREE MONTHS ENDED JUNE 30,

                         
        2015                          
        Consumer
Banking
    Commercial
Banking
    Other     Consolidated                          

Net income available to common stockholders:

                 

Net income (loss) (GAAP)

  A   $ 66      $ 135      ($ 11   $ 190           

Less: Preferred stock dividends

      —          —          —          —             
   

 

 

   

 

 

   

 

 

   

 

 

         

Net income available to common stockholders

  B   $ 66      $ 135      ($ 11   $ 190           
   

 

 

   

 

 

   

 

 

   

 

 

         

Return on average tangible common equity:

                 

Average common equity (GAAP)

    $ 4,681      $ 4,625      $ 10,085      $ 19,391           

Less: Average goodwill (GAAP)

      —          —          6,876        6,876           

Average other intangibles (GAAP)

      —          —          5        5           

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          437        437           
   

 

 

   

 

 

   

 

 

   

 

 

         

Average tangible common equity (non-GAAP)

  C   $ 4,681      $ 4,625      $ 3,641      $ 12,947           
   

 

 

   

 

 

   

 

 

   

 

 

         

Return on average tangible common equity (non-GAAP):

  B/C     5.66     11.69     NM        5.90        

Return on average total tangible assets:

                 

Average total assets (GAAP)

    $ 52,489      $ 42,617      $ 40,415      $ 135,521           

Less: Average goodwill (GAAP)

      —          —          6,876        6,876           

Average other intangibles (GAAP)

      —          —          5        5           

Add: Average deferred tax liabilities related to goodwill (GAAP)

      —          —          437        437           
   

 

 

   

 

 

   

 

 

   

 

 

         

Average tangible assets (non-GAAP)

  D   $ 52,489      $ 42,617      $ 33,971      $ 129,077           
   

 

 

   

 

 

   

 

 

   

 

 

         

Return on average total tangible assets (non-GAAP)

  A/D     0.51     1.27     NM        0.59        

Efficiency ratio:

                 

Noninterest expense (GAAP)

  E   $ 613      $ 181      $ 47      $ 841           

Net interest income (GAAP)

      544        286        10        840           

Noninterest income (GAAP)

      230        108        22        360           
   

 

 

   

 

 

   

 

 

   

 

 

         

Total revenue

  F   $ 774      $ 394      $ 32      $ 1,200           
   

 

 

   

 

 

   

 

 

   

 

 

         

Efficiency ratio (non-GAAP)

  E/F     79.25     46.07     NM        70.02        

 


Citizens Financial Group, Inc.

 

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS - SEGMENTS

(dollars in millions)

 

        FOR SIX MONTHS ENDED JUNE 30,  
        2016     2015  
        Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated  

Net income available to common stockholders:

                 

Net income (loss) (GAAP)

  A   $ 161      $ 297      $ 8      $ 466      $ 127      $ 282      ($ 10   $ 399   

Less: Preferred stock dividends

      —          —          7        7        —          —          —          —     
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to common stockholders

  B   $ 161      $ 297      $ 1      $ 459      $ 127      $ 282      ($ 10   $ 399   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity:

                 

Average common equity (GAAP)

    $ 5,099      $ 4,915      $ 9,653      $ 19,667      $ 4,665      $ 4,576      $ 10,158      $ 19,399   

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)

      —          —          488        488        —          —          430        430   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible common equity (non-GAAP)

  C   $ 5,099      $ 4,915      $ 3,263      $ 13,277      $ 4,665      $ 4,576      $ 3,707      $ 12,948   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average tangible common equity (non-GAAP)

  B/C     6.34     12.14     NM        6.96     5.48     12.41     NM        6.21

Return on average total tangible assets:

                 

Average total assets (GAAP)

    $ 55,388      $ 46,346      $ 38,745      $ 140,479      $ 52,048      $ 42,114      $ 40,267      $ 134,429   

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)

      —          —          488        488        —          —          430        430   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets (non-GAAP)

  D   $ 55,388      $ 46,346      $ 32,355      $ 134,089      $ 52,048      $ 42,114      $ 33,816      $ 127,978   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets (non-GAAP)

    A/D       0.58     1.29     NM        0.70     0.49     1.35     NM        0.63

Efficiency ratio:

                 

Noninterest expense (GAAP)

  E   $ 1,248      $ 373      $ 17      $ 1,638      $ 1,209      $ 354      $ 88      $ 1,651   

Net interest income (GAAP)

      1,183        614        30        1,827        1,077        562        37        1,676   

Noninterest income (GAAP)

      427        221        37        685        449        208        50        707   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

  F   $ 1,610      $ 835      $ 67      $ 2,512      $ 1,526      $ 770      $ 87      $ 2,383   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio (non-GAAP)

  E/F     77.52     44.73     NM        65.18     79.25     46.04     NM        69.27

 


Citizens Financial Group, Inc.

 

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.

 


Citizens Financial Group, Inc.

 

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.

 

Item 9.01 Financial Statements and Exhibits.

 

Exhibit 99.1    Citizens Financial Group, Inc. financial supplement for second quarter 2016

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

CITIZENS FINANCIAL GROUP, INC.
By:  

/s/ Eric Aboaf

  Eric Aboaf
  Chief Financial Officer

Date: July 25, 2016


EXHIBIT INDEX

 

Exhibit
Number

  

Description

99.1    Citizens Financial Group, Inc. financial supplement for second quarter 2016