Citizens Financial Group · Earnings release

Citizens Financial Group, Inc. Reports Third Quarter 2024 Net Income of

Underlying Net Income of $392 million and EPS of $0.79*

Key Financial Data

Third Quarter 2024 Highlights

Income

Statement

($s in millions)

■Underlying EPS of $0.79 and ROTCE of 9.7%

■Underlying PPNR of $655 million

–NII down 2.9% QoQ, driven by a 10 bp decline in NIM primarily related to the impact of forward starting swaps

–Fees down 2.7% QoQ reflecting seasonally lower Capital Markets; solid results in Card and Wealth

–Expenses down 1.3% QoQ notwithstanding continued investment in the Private Bank

■Strong ACL coverage of 1.61%, down 2 bps QoQ

■Period-end loans broadly stable with Non-Core run off offset by Core loan growth, namely Private Bank and retail; period-end Private Bank loans up $634 million to $2.0 billion

■Average deposits stable QoQ; Private Bank spot deposits up $1.6 billion to $5.6 billion

■Strong liquidity profile; spot LDR of 80.8%; FHLB reduced to $553 million, down $6.5 billion YoY on a spot basis

–Pro forma LCR of 122% exceeds Category 1 Bank requirement of 100%

■Net charge-offs of 54 bps, up 2 bps QoQ

■Strong CET1 ratio of 10.6%; TCE ratio of 7.0%

■TBV/share of $33.54, up 9.6% QoQ reflects net AOCI benefit

Total revenue

$

$

$

Pre-provision profit

Underlying pre-provision profit

Provision for credit losses

Net income

Underlying net income

Balance Sheet

&

Credit Quality

($s in billions)

Period-end loans and leases

$

$

$

Average loans and leases

Period-end deposits

Average deposits

Period-end loan-to-deposit ratio

%

%

%

NCO ratio

%

%

%

Financial Metrics

Diluted EPS

$

$

$

Underlying Diluted EPS

ROTCE

%

%

%

Underlying ROTCE

Net interest margin, FTE

Efficiency ratio

Underlying efficiency ratio

CET1

%

%

%

TBV/Share

$

$

$

Notable Items

($s in millions except per share data)

Pre-tax $

EPS

Integration-related

$

(2)

$

—

TOP and Other items

Total

$

$

Comments from Chairman and CEO Bruce Van Saun

“We continue to be pleased with the strong execution of our key initiatives during the third quarter,” said Chairman and CEO Bruce Van Saun. “Our Private Bank reached $5.6 billion in deposits and $4.1 billion in AUM, our NYC Metro region continues to achieve strong growth, and we are close to launching a TOP 10 program with $100 million plus impact. Our balance sheet

*Results presented on an Underlying basis are non-GAAP Financial Measures. See page 15 for additional information on our use of Non-GAAP Financial Measures.

Citizens Financial Group, Inc.

remains strong across capital, liquidity, funding and loan loss reserves. While Q3 was impacted by the drag from forward-starting swaps that commenced in July, as well as some fees that pushed out to Q4, we project a strong fourth quarter and launch into 2025.”

Citizens also announced today that its board of directors declared a quarterly common stock dividend of $0.42 per share. The dividend is payable on November 13, 2024 to shareholders of record at the close of business on October 30, 2024.

2

Citizens Financial Group, Inc.

Earnings highlights(1):

Quarterly Trends

($s in millions, except per share data)

Earnings

$/bps

%

$/bps

%

Net interest income

$

$

$

$

(3)

%

$

%

Noninterest income

(4)

8

Total revenue

(3)

(6)

Noninterest expense

(3)

(3)

Pre-provision profit

(3)

Provision for credit losses

(5)

—

—

Net income

(3)

Preferred dividends

3

9

8

Net income available to common stockholders

$

$

$

$

(4)

%

$

%

After-tax notable Items

(6)

(8)

Underlying net income

$

$

$

$

(4)

%

$

%

Underlying net income available to common stockholders

(5)

Average common shares outstanding

Basic (in millions)

(2)

(5)

Diluted (in millions)

(1)

(5)

Diluted earnings per share

$

$

$

$

(1)

%

$

(9)

%

Underlying diluted earnings per share

(4)

Performance metrics

Net interest margin

%

%

%

bps

bps

Net interest margin, FTE

Effective income tax rate

7

Efficiency ratio

(4)

Underlying efficiency ratio

Return on average tangible common equity

Underlying return on average tangible common equity

Return on average total tangible assets

(3)

(9)

Underlying return on average total tangible assets

%

%

%

(4)

bps

bps

Capital adequacy(2,3)

Common equity tier 1 capital ratio

%

%

%

Total capital ratio

Tier 1 leverage ratio

Tangible common equity ratio

Allowance for credit losses to loans and leases

%

%

%

(2)

bps

6

bps

Asset quality(3)

Nonaccrual loans and leases to loans and leases

%

%

%

bps

bps

Allowance for credit losses to nonaccrual loans and leases

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

%

%

%

2

bps

bps

(1) Unless otherwise noted, references to balance sheet items are on an average basis, loans exclude loans held for sale, earnings per share

represent fully diluted per common share and references to NIM are on a FTE basis.

(2) Current reporting-period regulatory capital ratios are preliminary.

(3) Capital adequacy and asset-quality ratios calculated on a period-end basis, except net charge-offs.

3

Citizens Financial Group, Inc.

The following table provides information on Underlying results which exclude the impact of notable items.

Underlying results:

Quarterly Trends

($s in millions, except per share data)

$/bps

%

$/bps

%

Net interest income

$

$

$

$

(3)

%

$

%

Noninterest income

(3)

9

Total revenue

$

$

$

$

(3)

%

$

(6)

%

Noninterest expense

(1)

(2)

Provision for credit losses

(5)

—

—

Net income available to common stockholders

$

$

$

$

(5)

%

$

%

Performance metrics

EPS

$

$

$

$

(4)

%

$

%

Efficiency ratio

%

%

%

bps

bps

Return on average tangible common equity

%

%

%

bps

bps

Consolidated balance sheet summary(1):

($s in millions)

$/bps

%

$/bps

%

Total assets

$

$

$

$

—

%

$

(2)

%

Total loans and leases

—

(5)

Total loans held for sale

(3)

Deposits

(1)

(2)

Stockholders' equity

4

9

Stockholders' common equity

5

9

Tangible common equity

$

$

$

$

8

%

$

%

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

%

%

%

bps

bps

Loan-to-deposit ratio (average)(2)

%

%

%

bps

bps

(1) Represents period-end unless otherwise noted.

(2) Excludes loans held for sale.

4

Citizens Financial Group, Inc.

Notable items:

Quarterly results reflect notable items primarily related to integration costs associated with recent acquisitions, as well as TOP revenue and efficiency initiatives and other items. In addition, second quarter 2024 includes a notable item for an industry-wide FDIC special assessment. These notable items have been excluded from reported results to better reflect Underlying operating results.

Notable items - Integration-related

($s in millions, except per share data)

Pre-tax

After-tax

Pre-tax

After-tax

Pre-tax

After-tax

Salaries & benefits

$

(2)

$

(2)

$

(3)

$

(2)

$

(4)

$

(3)

Equipment and software

—

—

—

—

—

—

Outside services

—

—

—

—

(4)

(3)

Occupancy

—

—

—

—

—

—

Other expense

—

—

—

—

—

—

Noninterest expense

$

(2)

$

(2)

$

(3)

$

(2)

$

(8)

$

(6)

EPS Impact - Noninterest expense

$

—

$

$

Total integration related

$

(2)

$

(2)

$

(3)

$

(2)

$

(8)

$

(6)

EPS Impact - Total Integration-related

$

—

$

$

Other notable items - TOP & Other

($s in millions, except per share data)

Pre-tax

After-tax

Pre-tax

After-tax

Pre-tax

After-tax

Tax notable items

$

—

$

—

$

—

$

7

$

—

$

—

Noninterest income

(2)

(1)

4

3

—

—

Salaries & benefits

(2)

(2)

(5)

(4)

(1)

—

Equipment and software

(2)

(2)

(4)

(3)

(6)

(5)

Outside services

(2)

(2)

(7)

(3)

(3)

Occupancy

(1)

—

(6)

(4)

(2)

(2)

FDIC special assessment(1)

—

—

(5)

(4)

—

—

Other expense

(2)

(1)

(3)

(2)

(2)

(2)

Noninterest expense

$

(9)

$

(7)

$

$

$

$

Total Other Notable Items

$

$

(8)

$

$

$

$

EPS Impact - Other Notable Items

$

$

$

Total Notable Items

$

$

$

$

$

$

Total EPS Impact

$

$

$

(1) The FDIC special assessment earnings per share impact is $(0.01) for second quarter 2024.

5

Citizens Financial Group, Inc.

Discussion of results:

Net interest income

($s in millions)

$/bps

%

$/bps

%

Interest income:

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

$

$

$

$

(2)

%

$

(9)

%

Investment securities

6

1

Interest-bearing deposits in banks

(9)

(7)

9

Total interest income

$

$

$

$

(1)

%

$

(2)

%

Interest expense:

Deposits

$

$

$

$

3

%

$

%

Short-term borrowed funds

3

4

8

(1)

(5)

Long-term borrowed funds

6

Total interest expense

$

$

$

$

5

—

%

$

9

%

Net interest income

$

$

$

$

(3)

%

$

%

Net interest margin, FTE

%

%

%

bps

bps

vs.

Net interest income of $1.4 billion decreased 2.9%, primarily reflecting lower net interest margin and slightly lower interest-earning assets.

•Net interest margin of 2.77% was down 10 basis points, largely reflecting the impact of forward starting swaps (9 basis points) and low-cost deposit migration, partly offset by the benefit of higher fixed-rate repricing and Non-Core run off.

•Interest-bearing deposit costs were up 4 basis points; total deposit costs were up 2 basis points, while total cost of funds was stable at 2.48%.

vs.

Net interest income of $1.4 billion decreased 10%, reflecting lower net interest margin and a 1% decline in average interest-earning assets.

•Net interest margin of 2.77% decreased 26 basis points, as an increase in swap and funding costs, and the impact of building liquidity were partly offset by higher interest-earning-asset yields and the benefit of Non-Core run off.

6

Citizens Financial Group, Inc.

Noninterest Income

($s in millions)

$

%

$

%

Service charges and fees

$

$

$

$

3

3

%

$

4

4

%

Capital markets fees

Card fees

1

1

Wealth fees(1)

1

1

Mortgage banking fees

(8)

Foreign exchange and derivative products

(3)

(8)

Letter of credit and loan fees

2

5

2

5

Securities gains, net

9

—

5

9

4

Other income(2)

6

Noninterest income

$

$

$

$

(4)

%

$

8

%

Underlying, as applicable

Card fees

$

$

$

$

(1)

(1)

$

Other income(2)

$

$

$

$

$

Underlying noninterest income

$

$

$

$

(3)

%

$

9

%

(1) Effective for 2Q24, Trust and Investment services fees was renamed to Wealth Fees to better reflect the broad range of wealth-related management fees and services provided to our customers.

(2) Includes bank-owned life insurance income and other miscellaneous income for all periods presented.

vs.

Underlying noninterest income of $534 million decreased $15 million, or 2.7%.

•Service charges increased $3 million reflecting higher overdraft and cash management fees.

•Capital markets fees decreased $40 million, largely driven by seasonally lower loan syndication and debt underwriting fees. Additionally, several meaningful expected 3Q M&A fees pushed into 4Q.

•Wealth fees increased $1 million, reflecting higher asset management fees, largely offset by lower transaction sales activity.

•Mortgage banking fees decreased $8 million, driven by lower MSR valuation, net of hedging. This drop in MSR revenue was offset by securities gains in the quarter which resulted from investment portfolio repositioning actions.

•Foreign exchange and derivative products revenue decreased $3 million, primarily reflecting lower client hedging activity given the commencement of Fed rate cuts and the shift lower of the forward curve.

•Other income increased $22 million from second quarter levels that included higher operational losses.

vs.

Underlying noninterest income of $534 million increased $42 million, or 9%.

•Service charges and fees increased $4 million, primarily driven by higher overdraft and cash management fees.

•Capital markets fees increased $27 million, given higher bond underwriting and M&A advisory, partly offset by lower loan syndication fees.

•Card fees increased $13 million, largely due to favorable vendor contract negotiations.

•Wealth fees increased $13 million, reflecting increased sales activity and higher asset management fees.

•Mortgage banking fees decreased $23 million, primarily reflecting lower MSR valuation, net of hedging.

•FX and derivative products revenue decreased $12 million given lower client activity in interest rate and commodities hedging.

7

Citizens Financial Group, Inc.

Noninterest Expense

($s in millions)

$

%

$

%

Salaries and employee benefits

$

$

$

$

2

—

%

$

(2)

%

Equipment and software

4

2

3

2

Outside services

(9)

Occupancy

(5)

(4)

1

1

Other operating expense

(7)

Noninterest expense

$

$

$

$

(3)

%

$

(3)

%

Notable items

$

$

$

$

%

$

Underlying, as applicable

Salaries and employee benefits

$

$

$

$

6

1

%

$

(2)

%

Equipment and software

6

3

7

4

Outside services

(7)

(9)

(6)

Occupancy

—

—

2

2

Other operating expense

(7)

Underlying noninterest expense

$

$

$

$

(1)

%

$

(2)

%

vs.

Underlying noninterest expense of $1.2 billion decreased 1.3%.

•Salaries and employee benefits increased $6 million, primarily reflecting hiring related to the Private Bank build-out.

•Equipment and software increased $6 million given technology investments and maintenance.

•Outside services decreased $11 million, largely driven by vendor efficiencies.

•Other operating expense decreased $18 million, primarily reflecting lower marketing-related costs and miscellaneous items.

Reported noninterest expense of $1.3 billion decreased $42 million, reflecting a reduction in Notable items.

The effective tax rate was 18.6% in third quarter 2024. On an underlying basis, the effective tax rate of 18.7% decreased modestly compared to 20.3% in second quarter 2024, primarily reflecting a higher benefit from tax-advantaged investments.

vs.

Underlying noninterest expense of $1.2 billion decreased 2%.

•Salaries and employee benefits decreased $11 million, primarily reflecting lower headcount, partly offset by hiring related to the Private Bank build-out.

•Equipment and software increased $7 million given technology investments and maintenance.

•Other operating expense decreased $12 million, primarily related to lower marketing-related costs.

The effective tax rate was 18.6% in third quarter 2024. On an underlying basis, the effective tax rate of 18.7% compared with 21.7% in third quarter 2023.

8

Citizens Financial Group, Inc.

Interest-earning assets

($s in millions)

Period-end interest-earning assets

$

%

$

%

Investments

$

$

$

$

2

%

$

%

Interest-bearing deposits in banks

(5)

Commercial loans and leases

—

(7)

Retail loans

—

(3)

Total loans and leases

—

(5)

Loans held for sale, at fair value

4

Other loans held for sale

Total loans and leases and loans held for sale

—

(6)

Total period-end interest-earning assets

$

$

$

$

—

%

$

(3)

%

Average interest-earning assets

Investments(1)

$

$

$

$

1

%

$

%

Interest-bearing deposits in banks

(8)

Commercial loans and leases

(1)

(8)

Retail loans

(1)

(4)

Total loans and leases

(1)

(6)

Loans held for sale, at fair value

(8)

Other loans held for sale

Total loans and leases and loans held for sale

(1)

(6)

Total average interest-earning assets

$

$

$

$

(1)

%

$

(1)

%

(1) Total average interest-earning assets excludes the mark-to-market on investment securities and unsettled purchases or sales of loans and investments.

vs.

Period-end interest-earning assets of $195.3 billion were relatively stable reflecting a $210 million decrease in loans and leases and a $555 million decrease in cash held in interest-bearing deposits, partly offset by a $751 million increase in investments in securities. The decrease in loans and leases reflects a $126 million decline in commercial driven by paydowns and balance sheet optimization actions as well as market conditions resulting in lower client demand. Results also reflect an $84 million decrease in retail, given $1.0 billion of Non-Core portfolio run off, partly offset by growth in home equity and mortgage.

Average interest-earning assets of $197.2 billion decreased $1.3 billion, or 1%, reflecting a $1.1 billion decrease in total loans and leases and a $754 million decrease in cash held in interest-bearing deposits, partly offset by a $392 million increase in investments. The decrease in loans and leases reflects a $675 million decrease in commercial given paydowns and balance sheet optimization actions as well as market conditions driving lower client demand. Retail decreased $389 million driven by Non-Core portfolio run off, partly offset by growth in home equity and mortgage.

The average effective duration of the securities portfolio was 3.3 years, compared with 3.7 years at June 30, 2024 and 5.2 years at September 30, 2023.

vs.

Period-end interest-earning assets of $195.3 billion decreased $5.2 billion, or 3%, reflecting a $8.3 billion decrease in total loans and leases and loans held for sale and a $3.7 billion decrease in investments in cash held in interest-bearing deposits, partly offset by a $6.9 billion increase in investments in securities. The decrease in loans and leases reflects a $5.6 billion decline in commercial given paydowns, balance sheet optimization actions and lower client demand, and a $2.5 billion decline in retail given $4.5 billion of Non-Core portfolio run off, partly offset by growth in home equity and mortgage.

Average interest-earning assets of $197.2 billion decreased $2.4 billion, or 1%, reflecting a $9.1 billion decrease in total loans and leases and loans held for sale, partly offset by a $5.8 billion increase in investments in securities and a $891 million increase in cash held in interest-bearing deposits.

9

Citizens Financial Group, Inc.

Deposits

($s in millions)

Period-end deposits

$

%

$

%

Demand

$

$

$

$

(3)

%

$

(7)

%

Money market

4

2

Checking with interest

(2)

1

Savings

(3)

(9)

Term

(3)

3

Total period-end deposits

$

$

$

$

(1)

%

$

(2)

%

Average deposits

Demand

$

$

$

$

—

%

$

(9)

%

Money market

3

2

Checking with interest

(2)

(1)

Savings

(3)

(9)

Term

—

Total average deposits

$

$

$

$

—

%

$

(1)

%

vs.

Total period-end deposits of $175.2 billion decreased 1% reflecting a reduction in higher-cost Treasury deposits, largely offset by $1.6 billion of growth in the Private Bank.

Average deposits of $174.1 billion are broadly stable reflecting $1.7 billion growth in Private Bank deposits, as well as stable Retail and Commercial deposits, largely offset by reduced higher-cost Treasury deposits.

vs.

Average deposits of $174.1 billion decreased 1%. Total period-end deposits of $175.2 billion decreased 2% driven by a reduction in higher-cost Treasury deposits, as well as rate-driven migration in Commercial and Retail, largely offset by growth in Private Bank deposits of $5.4 billion.

Citizens Financial Group, Inc.

Borrowed Funds

($s in millions)

Period-end borrowed funds

$

%

$

%

Short-term borrowed funds

$

$

2

$

$

NM

$

%

Long-term borrowed funds

FHLB advances

—

—

Senior debt

Subordinated debt and other debt

(3)

—

9

—

Auto collateralized borrowings

(9)

Total borrowed funds

$

$

$

$

7

%

$

%

Average borrowed funds

Short-term borrowed funds

$

$

$

$

$

%

Long-term borrowed funds

FHLB advances

Senior debt

Subordinated debt and other debt

(4)

(3)

Auto collateralized borrowings

(5)

Total average borrowed funds

$

$

$

$

%

$

1

%

vs.

Period-end borrowed funds increased by $875 million. Senior debt increased by $1.3 billion, reflecting new issuance. This was partly offset by a $389 million decrease in collateralized borrowings on auto loans given run off of the associated portfolio.

Average borrowed funds decreased $1.6 billion, largely driven by a $1.9 billion decrease in FHLB advances. Senior debt increased by $778 million, reflecting new issuance, and collateralized borrowings on auto loans decreased by $214 million.

vs.

Period-end borrowed funds decreased by $3.6 billion, primarily due to a decrease in FHLB advances of $6.5 billion, partly offset by the $2.5 billion increase in senior debt issuances and $556 million increase in auto collateralized borrowings.

Average borrowed funds increased by $132 million, reflecting a $3.5 billion decrease in FHLB advances driven by the run off of the Non-Core portfolio and re-mixing of funding to auto collateralized borrowings, up $1.9 billion, and senior debt issuances, up $2.2 billion.

Citizens Financial Group, Inc.

Capital

($s and shares in millions, except per share data)

Period-end capital

$

%

$

%

Stockholders' equity

$

$

$

$

4

%

$

9

%

Stockholders' common equity

5

9

Tangible common equity

8

Tangible book value per common share

$

$

$

$

%

$

%

Common shares - at end of period

(2)

(5)

Common shares - average (diluted)

(1)

%

(5)

%

Common equity tier 1 capital ratio(1)

%

%

%

Total capital ratio(1)