Form 8-K
CITIZENS FINANCIAL GROUP INC/RI Depositary Shares, each representing a 1/40th interest in a share of 6.350% Fixed-to-Floating Rate Non- Cumulative Perpetual Preferred Stock, Series D false 0000759944 0000759944 2020-07-17 2020-07-17 0000759944 us-gaap:CommonStockMember 2020-07-17 2020-07-17 0000759944 us-gaap:SeriesDPreferredStockMember 2020-07-17 2020-07-17 0000759944 us-gaap:SeriesEPreferredStockMember 2020-07-17 2020-07-17

 

 

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 17, 2020

 

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))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

symbol(s)

 

Name of each exchange

on which registered

Common stock, $0.01 par value per share

 

CFG

 

New York Stock Exchange

Depositary Shares, each representing a 1/40th interest in a share of 6.350% Fixed-to-Floating Rate Non- Cumulative Perpetual Preferred Stock, Series D

 

CFG PrD

 

New York Stock Exchange

Depositary Shares, each representing a 1/40th interest in a share of 5.000% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series E

 

CFG PrE

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 under the Securities Act (17 CFR 230.405) or Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

 

 


Item 2.02   Results of Operations and Financial Condition.

On July 17, 2020, Citizens Financial Group, Inc. (the “Company”) issued a press release announcing its second quarter 2020 earnings and posted on its website the press release and a financial supplement. Copies of the press release and financial supplement are being furnished as Exhibits 99.1 and 99.3, respectively.

Item 7.01   Regulation FD Disclosure.

For the benefit of investors, the Company has posted on its website an investor presentation in connection with its earnings conference call. A copy of the investor presentation is being furnished as Exhibit 99.2.

The information in this Form 8-K and Exhibits attached hereto are being furnished pursuant to Items 2.02 and 7.01, respectively, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall this information be deemed incorporated by reference into any filings under the Securities Act of 1933, as amended.

Item 9.01   Financial Statements and Exhibits.

   

Exhibit

Number

 

Description

             
 

(d)

   

Exhibit 99.1

 

Citizens Financial Group, Inc. press release dated July 17, 2020

             
 

   

Exhibit 99.2

 

Citizens Financial Group, Inc. earnings release presentation issued July 17, 2020

             
 

   

Exhibit 99.3

 

Citizens Financial Group, Inc. financial supplement for second quarter 2020

             
 

   

Exhibit 104

 

Cover Page Interactive Data File (embedded within the Inline XBRL document)


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/ John F. Woods

 

John F. Woods

 

Vice Chairman and Chief Financial Officer

Date: July 17, 2020

EX-99.1

Exhibit 99.1

 

 

LOGO

Citizens Financial Group, Inc. Reports Second Quarter Net Income of

$253 million and EPS of $0.53

Underlying Net Income of $263 million and EPS of $0.55*

CECL-related reserve build of $317 million, or $0.59 per share, tied to

COVID-19 impacts

CET1 ratio remains strong, increases to 9.6%

Record revenue with noninterest income up 28% year over year, paced by record results in Mortgage

4.6% positive operating leverage year over year, 5.9% on an Underlying basis

Tangible book value per share stable at $32, up 4% year over year

PROVIDENCE, RI (July 17, 2020) Citizens Financial Group, Inc. (NYSE: CFG or “Citizens”) today reported second quarter net income of $253 million, compared with $453 million in second quarter 2019, with earnings per share of $0.53, compared with $0.95 per share in second quarter 2019. Second quarter 2020 results reflect a net $10 million, or $(0.02) per share, after-tax reduction from notable items compared with a net $5 million, or $(0.01) per share, in second quarter 2019 and a net $25 million, or $(0.06) per share, in first quarter 2020. Second quarter 2020 Return on Average Tangible Common Equity* (“ROTCE”) of 6.6% compares with 12.8% in second quarter 2019 and 0.4% in first quarter 2020.

On an Underlying basis, which excludes notable items, second quarter 2020 net income available to common stockholders of $235 million compares with $440 million in second quarter 2019 and $37 million in first quarter 2020. Underlying EPS of $0.55 per share compares with $0.96 in second quarter 2019 and $0.09 in first quarter 2020. Underlying second quarter 2020 ROTCE of 6.9% compares with 12.9% in second quarter 2019 and 1.1% in first quarter 2020. Tangible book value per common share of $32.13 compares with $30.88 for second quarter 2019 and $31.97 for first quarter 2020.

In second quarter 2020, Citizens recorded provision for credit losses of $464 million pre-tax, or $0.87 per share after-tax, including a net reserve build under CECL of $317 million pre-tax, or $0.59 per share after-tax, primarily tied to COVID-19 impacts. In addition, in second quarter 2020 the company transferred $936 million of education loans to held for sale in connection with balance sheet optimization strategies and reallocated approximately $100 million of associated credit reserves to the remaining loan portfolio. In first quarter 2020, the company recorded provision for credit losses of $600 million pre-tax, or $1.10 per share after-tax, which includes a $463 million pre-tax, or $0.85 per share after-tax, net reserve build tied to COVID-19 impacts.

*References in this release to “Underlying” results exclude notable items and are Non-GAAP Financial Measures. Where there is a reference to “Underlying” results in a paragraph, all measures that follow these references are on the same basis. Additional information regarding the impact of notable items and Acquisitions on our results is described in this release. Please see the end of this release for important information on our use of Non-GAAP Financial Measures, and their reconciliation to GAAP financial measures. References in this release to balance sheet items are on an average basis and loans exclude loans held for sale (“LHFS”) unless otherwise noted. References to net interest margin are on a fully taxable equivalent (“FTE”) basis and all references to earnings per share represent fully diluted per common share. References to consolidated and/or commercial loans, loan growth, nonaccrual loans and allowance for loan losses include leases. The “Company” refers to Citizens. Current reporting-period regulatory capital ratios are preliminary. Select totals may not sum due to rounding.


Citizens Financial Group, Inc.

 

On an Underlying basis and before the reserve build, second quarter 2020 net income available to common stockholders, reflecting net charge-offs of $147 million, totaled $490 million, EPS was $1.14 per share, and ROTCE was 14.4%. This compares to first quarter 2020 Underlying net income available to common stockholders reflecting net charge-offs of $402 million, EPS of $0.94 per share, and ROTCE of 12.0%.

Citizens remains strongly capitalized and maintains ample liquidity to assist companies in navigating these challenging times. At June 30, 2020, the common equity tier 1 (“CET1”) capital ratio increased to 9.6%, the spot loans-to-deposits ratio was 87.5%, or 84.3% excluding U.S. Small Business Administration Paycheck Protection Program (“PPP”) loans, and the liquidity coverage ratio was fully compliant. In second quarter 2020, the increase in the allowance for credit losses results in a June 30, 2020 allowance for credit losses (“ACL”) of $2.5 billion and an ACL to loans ratio of 2.01%, or 2.09% excluding PPP loans. Citizens has continued to work with borrowers by providing forbearance, and as of June 30, 2020 had approximately 129,000 consumers in forbearance. In addition, Citizens has been working proactively with commercial customers seeking flexibility on loan terms and conditions. Citizens secured financing through the PPP program for approximately 49,000 of its small business customers, providing $4.7 billion in loans and supporting over 540,000 jobs.

”This was an outstanding quarter for Citizens in all respects,” said Chairman and CEO Bruce Van Saun. “We successfully navigated the challenging external environment, taking great care of customers and colleagues, while demonstrating the diversification and resilience of our business model. We posted record revenue and pre-provision profit, built a strong loan loss reserve, and grew our CET1 capital ratio to 9.6%. We were also pleased to announce further commitments to diversity and inclusion, along with initiatives to promote racial equity and social justice.”

Citizens also announced today that its board of directors declared a third quarter 2020 common stock dividend of $0.39 per share. The dividend is payable on August 12, 2020 to shareholders of record at the close of business on July 29, 2020. The quarterly dividend is 8% higher than the year-ago quarter.

Second quarter 2020 vs. second quarter 2019

                                                                                                                                                                                                                                                                                                                                                                 

Key highlights

 

   

Second quarter 2020 highlights include record revenue of $1.7 billion, up 7%, reflecting stable net interest income and a 28% increase in noninterest income driven by record results in mortgage banking.

 

   

Second quarter 2020 results reflect a net $10 million after-tax reduction, or $(0.02) per share, from notable items compared with a net $5 million after-tax reduction, or $(0.01) per share, in second quarter 2019.

 

   

Results reflect an efficiency ratio of 55.9%, operating leverage of 4.6% and ROTCE of 6.6%, with Underlying ROTCE of 6.9%; Underlying operating leverage of 5.9% reflects continued strong focus on top-line growth and expense management, while the Underlying efficiency ratio was 54.9%.

 

   

Provision for credit losses of $464 million includes a reserve build of $317 million, primarily tied to COVID-19 impacts.

 

2


Citizens Financial Group, Inc.

 

   

Tangible book value per share of $32.13 compares with $30.88 for second quarter 2019. Fully diluted average common shares outstanding decreased by 31.7 million shares, or 7%.

Results

 

   

Total revenue increased $122 million, or 7%, reflecting stable net interest income and record noninterest income.

 

   

Net interest income was stable, reflecting lower funding costs and 11% growth in interest-earning assets, offset by the impact of the lower rate and challenging yield-curve environment on asset yields.

 

   

Net interest margin of 2.88% decreased 33 basis points, reflecting the negative impact of lower interest rates and higher cash balances given strong deposit flows, partially offset by lower funding costs and improved mix. Interest-bearing deposit costs decreased 82 basis points, reflecting strong pricing discipline.

 

   

Record noninterest income of $590 million increased 28%, driven by record results in mortgage banking given strong origination volumes and improved gain-on-sale margins, as well as strength in capital markets fees. Foreign exchange and interest rate products reflect good underlying business performance given improved market conditions. Service charges and fees, card fees and trust and investment services fees were lower reflecting COVID-19 impacts. Other income declined from second quarter 2019 levels that reflected higher leasing income.

 

   

Noninterest expense of $979 million increased 3%. Underlying noninterest expense of $960 million increased 2%, reflecting higher equipment and software expense given continued investments in technology, as well as an increase in outside services, partially offset by lower occupancy and other operating expense. Salaries and employee benefits expense was relatively stable.

 

   

Provision for credit losses of $464 million compares with $97 million in second quarter 2019. Higher net charge-offs reflect an increase in commercial, partially offset by a decrease in retail given the impact of forbearance.

Balance Sheet

 

   

Period-end loan growth of $8.9 billion, or 8%, reflects 14% growth in commercial, which includes approximately $4.7 billion of PPP loans to small business customers, higher line of credit utilization tied to COVID-19 disruption, as well as 2% growth in retail. Loan growth was 10% before the impact of planned loan sales activity tied to balance sheet optimization strategies.

 

   

Period-end deposit growth of $19.6 billion, or 16%, outpaced loan growth given strong deposit flows, as consumers and small businesses benefited from government stimulus and corporate clients built liquidity.

 

   

Average interest-earning assets increased $16.1 billion, or 11%, driven by 9% loan growth, which includes the $3.4 billion average impact of the PPP loans, as well as higher commercial line of credit utilization of $4.9 billion tied to COVID-19 disruption. Loan growth was 11% before the impact of planned loan sales activity tied to balance sheet optimization strategies.

 

   

Average deposits increased $18.4 billion, or 15%, reflecting growth in money market accounts, demand deposits, savings and checking with interest partially offset by a decrease in term deposits.

 

   

Average loan-to-deposit ratio improved to 90.9%, or 88.5% excluding PPP loans, from 95.6%; period-end loan-to-deposit ratio of 87.5%, or 84.3% excluding PPP loans, compares with 94.2% in second quarter 2019.

 

3


Citizens Financial Group, Inc.

 

   

Allowance coverage for loans of 2.01%, or 2.09% excluding PPP loans, compares with 1.13% as of June 30, 2019, reflecting the first quarter 2020 implementation of CECL and the provisions associated with COVID-19 impacts.

 

   

Nonaccrual loans to loans ratio of 0.79% compares with 0.62% as of June 30, 2019.

 

   

Allowance coverage of nonaccrual loans of 255% compares with 182% as of June 30, 2019, reflecting the first quarter 2020 implementation of CECL and the provisions associated with COVID-19 impacts.

 

   

Capital remains strong, with a CET1 ratio of 9.6%.

 

   

Citizens paid $168 million in dividends to common shareholders.

Second quarter 2020 vs. first quarter 2020

                                                                                                                                                                                                                                                                                                                               

Key highlights

 

   

Second quarter 2020 highlights include record revenue of $1.7 billion, up 6%, reflecting stable net interest income and record noninterest income, up 19%.

 

   

Second quarter 2020 results reflect a net $10 million after-tax reduction, or $(0.02) per share, from notable items compared with a net $25 million after-tax reduction, or ($0.06) per share, in first quarter 2020.

 

   

Results reflect an efficiency ratio of 55.9%; Underlying efficiency ratio of 54.9% compares with 59.1% in first quarter 2020, reflecting record revenue and well-controlled expenses. Continued strong focus on top-line growth and expense management helped drive positive operating leverage of 9.0%, or 7.6% on an Underlying basis.

 

   

Provision for credit losses of $464 million includes a reserve build of $317 million, primarily associated with COVID-19 impacts. This compares with $600 million in first quarter 2020, which includes a $463 million reserve build associated with COVID-19.

 

   

ROTCE of 6.6% reflects the provision under CECL associated with COVID-19 impacts. Underlying ROTCE of 6.9% compares with 1.1% in first quarter 2020.

 

   

Tangible book value per common share of $32.13 was up 1%. Fully diluted average common shares outstanding decreased by 1.8 million shares.

Results

 

   

Total revenue of $1.7 billion increased 6%, reflecting stable net interest income and record noninterest income.

 

   

Net interest income of $1.2 billion was stable, as the benefit of interest-earning asset growth and improved deposit mix was offset by the impact of lower interest rates.

 

   

Net interest margin of 2.88% decreased 22 basis points, as the negative impact of lower interest rates and higher cash balances and the addition of lower-yielding PPP loans was partially offset by the impact of disciplined deposit pricing and improved funding mix. Interest-bearing deposit costs decreased 46 basis points.

 

   

Record noninterest income of $590 million increased 19%, reflecting record mortgage banking fees and higher capital markets and foreign exchange and interest rate products given improved market conditions. Service charges and fees, card fees and trust and investment services fees were lower reflecting COVID-19 impacts.

 

4


Citizens Financial Group, Inc.

 

   

Noninterest expense of $979 million decreased $33 million, or 3%, and includes the impact of notable items. On an Underlying basis, noninterest expense of $960 million decreased $19 million, or 2%, largely reflecting seasonally lower salaries and employee benefits expense, partially offset by higher equipment and software expense.

Balance sheet

 

   

Period-end loans decreased $1.8 billion, or 1.4%, reflecting a 2% decrease in commercial, given a $5.4 billion decrease in line of credit utilization, partially offset by approximately $4.7 billion of PPP loans to small business customers.

 

   

Period-end deposit growth of $10.1 billion, or 8%, outpaced loan growth given strong deposit flows, as consumers and small businesses benefited from government stimulus and corporate clients built liquidity.

 

   

Average interest-earning assets increased $11.4 billion, or 8%, driven by 6% loan growth, which includes the $3.4 billion average impact of the PPP loans and higher line of credit utilization of $3.9 billion tied to COVID-19 disruption.

 

   

Average deposits increased 12%, reflecting growth in demand deposits, money market accounts, checking with interest and savings, partially offset by a decrease in term deposits.

 

   

Average loan-to-deposit ratio of 90.9%, or 88.5% excluding PPP loans, compares with 95.6% in first quarter 2020; period-end loan-to-deposit ratio of 87.5%, or 84.3% excluding PPP loans, compares to 95.5% in first quarter 2020.

 

   

Allowance coverage for loans of 2.01%, or 2.09% excluding PPP loans, compares with 1.73% as of March 31, 2020.

 

   

Nonaccrual loans to loan ratio of 0.79% compares with 0.61% as of March 31, 2020.

 

   

Allowance coverage of nonaccrual loans of 255% compares with 283% as of March 31, 2020.

 

5


Citizens Financial Group, Inc.

 

Earnings highlights:

 

          Quarterly Trends  
                                2Q20 change from  
($s in millions, except per share data)        2Q20     1Q20     2Q19          1Q20          2Q19  
                       
Earnings                                     $/bps             %                  $/bps             %  
                              
Net interest income      $     1,160     $     1,160     $     1,166        $        %       $ (6     (1 ) % 
Noninterest income        590       497       462          93       19          128       28  
Total revenue        1,750       1,657       1,628          93       6          122       7  
Noninterest expense        979       1,012       951          (33     (3        28       3  
Pre-provision profit        771       645       677          126       20          94       14  
Provision for credit losses        464       600       97          (136     (23        367              NM 
                                  
Net income        253       34       453          219                  NM         (200     (44
Preferred dividends        28       22       18          6       27          10       56  
Net income available to common stockholders      $ 225     $ 12     $ 435        $ 213       NM        $ (210     (48 ) % 
                                  
After-tax notable Items        10       25       5          (15     (60        5       100  
                                  
Underlying net income      $ 263     $ 59     $ 458        $ 204              NM       $ (195     (43 ) % 
Underlying net income available to common stockholders      $ 235     $ 37     $ 440        $ 198              NM       $ (205     (47 ) % 
                                  
Average common shares outstanding                       

Basic (in millions)

       426.6       427.7       458.2          (1.1              (31.5     (7

Diluted (in millions)

       427.6       429.4       459.3          (1.8              (31.7     (7
Diluted earnings per share      $ 0.53     $ 0.03     $ 0.95        $ 0.5              NM       $ (0.42     (44 ) % 
                                  
Underlying diluted earnings per share      $ 0.55     $ 0.09     $ 0.96        $ 0.46              NM       $ (0.41)       (43 ) % 
                                  
Key performance metrics*                       
Net interest margin        2.87  %      3.09  %      3.20  %         (22 ) bps           (33 ) bps   
Net interest margin, FTE        2.88       3.10       3.21          (22          (33  
Effective income tax rate        17.7       24.1       21.9          (644          (417  
Efficiency ratio        56       61       58          (519          (250  
Underlying efficiency ratio        55       59       58          (423          (317  
Return on average common equity        4.4       0.2       8.5          420            (410  
Return on average tangible common equity        6.6       0.4       12.8          626            (613  
Underlying return on average tangible common equity        6.9       1.1       12.9          580            (599  
Return on average total assets        0.57       0.08       1.13          49            (56  
Underlying return on average total tangible assets        0.61  %      0.15  %      1.19  %         46  bps           (58 ) bps   
                                  
Capital adequacy(1,2)                       
Common equity tier 1 capital ratio        9.6  %      9.4  %      10.5  %               
Total capital ratio        13.1       12.5       13.4                
Tier 1 leverage ratio        9.3       9.6       10.1                
Allowance for credit losses to loans and leases        2.01       1.73       1.13          28  bps           88  bps   
                                  
Asset quality(2)                       
Nonaccrual loans and leases to loans and leases        0.79  %      0.61  %      0.62  %         18  bps           17  bps   
Allowance for credit losses to nonaccrual loans and leases        255       283       182                 NM                  NM   
Net charge-offs as a % of average loans and leases        0.46  %      0.46  %      0.36  %          bps           10  bps   
                            

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.

 

6


Citizens Financial Group, Inc.

 

Notable items:

First and second quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives. First and second quarter 2020 and second quarter 2019 results also reflect notable items related to integration costs primarily tied to the August 1, 2018 Franklin American Mortgage Company (“FAMC”) acquisition. These notable items have been excluded from reported results to better reflect Underlying operating results.

Cumulative after-tax integration costs related to the FAMC acquisition totaled $32 million through the end of second quarter 2020.

 

Notable items - integration costs        2Q20          1Q20          2Q19         

Cumulative after-tax
integration costs

    

 
($s in millions, except per share data)        Pre-tax     After-tax     EPS          Pre-tax     After-tax     EPS          Pre-tax     After-tax     EPS          FAMC     Other     Total  
                                    

 

Noninterest income

     $     $     $        $     $     $        $     $     $        $ (3   $     $ (3

 

Salaries & benefits

     $     $     $        $     $     $        $ (2   $ (1   $        $ (10   $     $ (10

 

Equipment & software

                            (1     (1                                   (2           (2

 

Outside services

       (2     (1              (3     (2     (0.01        (5     (4     (0.01        (13     (5     (18

 

Occupancy

                                                                      (1           (1

 

Other expense

                                                                      (3           (3
                                    

Noninterest expense

     $ (2   $ (1   $        $ (4   $ (3   $ (0.01      $ (7   $ (5   $ (0.01      $ (29     (5   $ (34
                                    
Total Integration costs      $ (2   $ (1   $        $ (4   $ (3   $ (0.01      $ (7   $ (5   $ (0.01      $ (32   $ (5   $ (37
                                    
Other notable items - primarily tax and TOP        2Q20          1Q20          2Q19             
($s in millions, except per share data)        Pre-tax     After-tax     EPS          Pre-tax     After-tax     EPS          Pre-tax     After-tax     EPS      
                           

 

Tax notable items

     $     $ 4     $ 0.01        $     $     $        $     $     $    

 

Other notable items - TOP & other actions

                            

 

Salaries & benefits

 

       (4     (4     (0.01        (10     (7     (0.02                       

Equipment & software

                                                                

 

Outside services

       (10     (7     (0.02        (15     (12     (0.02                       

 

Occupancy

       (3     (2              (4     (3     (0.01                       
                           

Noninterest expense

     $ (17   $ (13   $ (0.03      $ (29   $ (22   $ (0.05      $     $     $    
                           
Total other notable items      $ (17   $ (9   $  (0.02      $ (29   $ (22   $ (0.05      $     $     $    
                           

    

                            
                           
Total notable items      $ (19   $ (10   $ (0.02      $ (33   $ (25   $ (0.06      $ (7   $ (5   $  (0.01  
                           

 

7


Citizens Financial Group, Inc.

 

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

Underlying results:

 

     Quarterly Trends  
                              2Q20 change from  
($s in millions, except per share data)    2Q20     1Q20     2Q19            1Q20            2Q19  
              

Net interest income

   $ 1,160     $ 1,160     $ 1,166           %         (1 ) % 

Noninterest income

     590       497       462          19          28  
              

Total revenue

   $     1,750     $     1,657     $     1,628          6  %         7  % 

Noninterest expense

     979       1,012       951          (3        3  

Notable items

     19       33       7          (42        171  
              

Underlying noninterest expense

   $ 960     $ 979     $ 944          (2 ) %         2  % 

Underlying pre-provision profit

     790       678       684          17          15  

Provision for credit losses

     464       600       97          (23        NM  
              

Net income available to common stockholders

     225       12       435          NM          (48

Underlying net income available to common stockholders

     235       37       440          NM          (47
              

Key performance metrics*

                
              

Diluted EPS

   $ 0.53     $ 0.03     $ 0.95          NM          (44 ) % 

Underlying EPS

   $ 0.55     $ 0.09     $ 0.96          NM          (43 ) % 

Efficiency ratio

     56  %      61  %      58  %         (519 ) bps         (250 ) bps 

Underlying efficiency ratio

     55       59       58          (423        (317
              

Operating leverage

              9.0          4.6  

Underlying operating leverage

              7.6  %         5.9  % 
              

 

8


Citizens Financial Group, Inc.

 

Discussion of results:

 

Net interest income

 

                    

2Q20 change from

 

 
($s in millions)    2Q20     1Q20     2Q19             1Q20          2Q19  
                        
                       $/bps         %              $/bps         %
                             

Interest income:

              

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

   $     1,219     $     1,326     $     1,409     $ (107       (8 ) %       $ (190     (13 ) % 

Investment securities

     130       147       164       (17       (12        (34     (21

Interest-bearing deposits in banks

     1       5       7       (4       (80        (6     (86
                    

Total interest income

   $ 1,350     $ 1,478     $ 1,580     $ (128       (9 ) %       $ (230     (15 ) % 
                    

Interest expense:

              

Deposits

   $ 124     $ 227     $ 308     $ (103       (45 ) %       $ (184     (60 ) % 

Short-term borrowed funds

           1       4       (1       (100        (4     (100

Long-term borrowed funds

     66       90       102       (24       (27        (36     (35
                    

Total interest expense

   $ 190     $ 318     $ 414     $     (128       (40 ) %       $     (224     (54 ) % 
                    

Net interest income

   $ 1,160     $ 1,160     $ 1,166     $           %       $ (6     (1 ) % 
                    
              
                    

Net interest margin, FTE

     2.88     3.10     3.21     (22 ) bps               (33 ) bps   
                    
   

Net interest income of $1.2 billion was broadly stable with second quarter 2019, despite the lower rate and challenging yield-curve environment, given lower funding costs and 11% growth in interest-earning assets, which reflects 16% growth in commercial loans, including approximately $4.7 billion of PPP loans to small business customers at quarter-end and higher commercial line of credit utilization of $4.9 billion tied to COVID-19 disruption, as well as 2% growth in retail loans.

Net interest margin of 2.88% decreased 33 basis points from second quarter 2019 as the impact of lower interest rates and higher cash balances reflecting strong deposit flows was partially offset by lower funding costs and improved funding mix.

Compared with first quarter 2020, net interest income of $1.2 billion was stable as the benefit of 8% interest-earning asset growth, which reflects approximately $4.7 billion of PPP loans to small business customers at quarter-end, and improved deposit mix, was offset by the negative impact of lower rates. The net interest margin of 2.88% decreased 22 basis points, and includes the approximately 21 basis point negative impact of lower rates, 8 basis point negative impact of asset mix, including higher cash balances given strong deposit flows and the addition of lower-yielding PPP loans, partially offset by the approximately 7 basis point improvement given disciplined deposit pricing and improved deposit mix. Interest-bearing deposit costs decreased 46 basis points.

 

9


Citizens Financial Group, Inc.

 

Noninterest Income

 

                               

2Q20 change from

 

 
($s in millions)        2Q20      1Q20      2Q19          1Q20     2Q19  
              
                                  $     %     $     %  
                             

Service charges and fees

     $ 84      $ 118      $ 126        $     (34     (29 ) %    $ (42     (33 ) % 

Mortgage banking fees

       276        159        62          117       74       214       NM  

Card fees

       48        56        64          (8     (14     (16     (25

Capital markets fees

       61        43        57          18       42       4       7  

Trust and investment services fees

       45        53        53          (8     (15     (8     (15

Foreign exchange and interest rate products

       34        24        35          10       42       (1     (3

Letter of credit and loan fees

       31        34        33          (3     (9     (2     (6

Securities gains, net

       3               4          3       100       (1     (25

Other income(1)

       8        10        28          (2     (20     (20     (71
                          

Noninterest income

     $     590      $     497      $     462        $ 93       19  %    $     128       28  % 
                                   

 

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

 

Record noninterest income of $590 million increased $128 million, or 28%, from second quarter 2019. Results reflect record mortgage banking fees of $276 million, driven by strong origination volumes tied to lower interest rates, as well as improved gain-on-sale margins. Capital market fees of $61 million increased 7%, reflecting higher debt and equity underwriting activity and a $14 million mark-to-market recovery on loan/bond trading assets. These results were partially offset by COVID-19 impacts in service charges and fees, card fees and trust and investment services fees. Other income declined from second quarter 2019 levels that included higher leasing income.

Compared with first quarter 2020, noninterest income increased $93 million, or 19%, reflecting record mortgage banking fees, as well as higher capital markets fees and foreign exchange and interest rate product fees from first quarter 2020 levels that included a $21 million mark-to-market loss on loan/bond trading assets and a $9 million negative credit valuation adjustment, respectively. These results were partially offset by COVID-19 impacts in service charges and fees, card fees and trust and investment services fees.

 

Noninterest Expense

 

                           

2Q20 change from

 

 
($s in millions)    2Q20      1Q20      2Q19          1Q20          2Q19  
                         
                              $     %          $     %  
                     

Salaries and employee benefits

   $ 513      $ 549      $ 507        $ (36     (7 ) %       $ 6       1  % 

Equipment and software expense

     142        133        126          9       7          16       13  

Outside services

     131        135        118          (4     (3        13       11  

Occupancy

     82        84        82          (2     (2               

Other operating expense

     111        111        118                         (7     (6
                             

Noninterest expense

   $     979      $     1,012      $     951        $     (33     (3 ) %       $     28       3  % 
                             

Notable items

   $ 19      $ 33      $ 7        $ (14     (42 )%       $ 12       171  % 
                             

 

Underlying, as applicable

                      
                             

Salaries and employee benefits

   $ 509      $ 539      $ 505        $ (30     (6 ) %       $ 4       1  % 

Equipment and software expense

     142        132        126          10       8          16       13  

Outside services

     119        117        113          2       2          6       5  

Occupancy

     79        80        82          (1     (1        (3     (4

Other operating expense

     111        111        118                         (7     (6
                             

Underlying noninterest expense

   $ 960      $ 979      $ 944        $ (19     (2 ) %       $ 16       2  % 
                             

 

10


Citizens Financial Group, Inc.

 

Second quarter 2020 noninterest expense of $979 million increased $28 million, or 3%, from second quarter 2019. Underlying noninterest expense of $960 million increased $16 million, or 2%, reflecting higher equipment and software expense given continued investments in technology, as well as higher outside services expense largely tied to growth initiatives. These results were partially offset by reductions in occupancy expense and other operating expense. Salaries and employee benefits expense was relatively stable.

Compared with first quarter 2020, noninterest expense decreased $33 million, or 3%. Underlying noninterest expense of $960 million decreased $19 million, or 2%, largely reflecting seasonally lower salaries and employee benefits, partially offset by an increase in equipment and software expense driven by increased technology spend.

The second quarter 2020 effective tax rate was 17.7%. On an Underlying basis, the effective tax rate of 19.4% compares with 21.9% for second quarter 2019 and 24.5% for first quarter 2020. The decrease from second quarter 2019 reflects the greater impact of tax-advantaged investments given lower pre-tax income.

 

Consolidated balance sheet review(1)                            

2Q20 change from

 

 
($s in millions)    2Q20     1Q20     2Q19            1Q20            2Q19  
                         
                             

$/bps

 

   

    %    

 

          

$/bps

 

   

%

 

 

Total assets

   $     179,874     $ 176,719     $     162,749        $     3,155       2  %       $     17,125       11  % 

Total loans and leases

     125,713       127,528       116,838          (1,815     (1        8,875       8  

Total loans held for sale

     4,993       3,261       2,205          1,732       53          2,788       126  

Deposits

     143,618       133,475       124,004          10,143       8          19,614       16  

Stockholders’ equity

     22,418       21,950       22,017          468       2          401       2  

Stockholders’ common equity

     20,453       20,380       20,884          73                (431     (2

Tangible common equity

   $ 13,716     $ 13,639     $ 14,141        $ 77       1  %       $ (425     (3 ) % 

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

     87.5  %      95.5  %      94.2  %         (801 ) bps           (669 ) bps   

Loans to deposit ratio (average)(2)

     90.9       95.6       95.6          (467          (471  

Common equity tier 1 capital ratio(3)

     9.6       9.4       10.5                

Total capital ratio(3)

     13.1  %      12.5  %      13.4  %               
                         

1) Represents period end unless otherwise noted.

2) Excludes loans held for sale.

3) Current reporting period regulatory capital ratios are preliminary.

Total assets of $179.9 billion at June 30, 2020, increased $17.1 billion, or 11%, from June 30, 2019, reflecting an $11.7 billion increase in loans and loans held for sale, which was largely driven by approximately $4.7 billion of PPP loans to small business customers and an increase in commercial line of credit utilization given the impact of COVID-19 disruption. In the second quarter 2020, $936 million of education loans were transferred to held for sale in connection with balance sheet optimization strategies. Results also reflect a $4.4 billion increase in the investment portfolio. Compared with March 31, 2020, total assets increased $3.2 billion, or 2%, reflecting the addition of PPP loans and growth in the investment portfolio tied to strong deposit inflows, partially offset by lower commercial line of credit utilization tied to COVID-19.

 

11


Citizens Financial Group, Inc.

 

Interest-earning assets                              

2Q20 change from

 

 
($s in millions)    2Q20      1Q20      2Q19            1Q20            2Q19  
                         
Period-end interest-earning assets                               $     %            $      %
                              

Investments and interest-bearing deposits

   $ 32,490      $ 29,535      $ 28,123        $ 2,955       10  %       $ 4,367        16  % 

Commercial loans and leases

     64,930        66,032        56,963          (1,102     (2        7,967        14  

Retail loans

     60,783        61,496        59,875          (713     (1        908        2  

Total loans and leases

     125,713        127,528        116,838          (1,815     (1        8,875        8  

Loans held for sale, at fair value

     3,631        2,911        1,750          720       25          1,881        107  

Other loans held for sale

     1,362        350        455          1,012       NM          907        199  

Total loans and leases and loans held for sale

     130,706        130,789        119,043          (83              11,663        10  
                              

Total period-end interest-earning assets

   $     163,196      $     160,324      $     147,166        $     2,872       2  %       $     16,030        11  % 
                              

Average interest-earning assets

                       

Investments and interest-bearing deposits

   $ 30,415      $ 27,202      $ 26,854        $ 3,213       12  %       $ 3,561        13  % 

Commercial loans and leases

     67,409        59,510        57,879          7,899       13          9,530        16  

Retail loans

     61,346        61,545        59,904          (199              1,442        2  

Total loans and leases

     128,755        121,055        117,783          7,700       6          10,972        9  

Loans held for sale, at fair value

     2,710        1,890        1,528          820       43          1,182        77  

Other loans held for sale

     510        799        158          (289     (36        352        223  

Total loans and leases and loans held for sale

     131,975        123,744        119,469          8,231       7          12,506        10  
                              

Total average interest-earning assets

   $ 162,390      $ 150,946      $ 146,323        $ 11,444       8  %       $ 16,067        11  % 
                              

Period-end interest-earning assets of $163.2 billion increased $16.0 billion, or 11%, from June 30, 2019, driven by a $11.7 billion, or 10%, increase in loans and loans held for sale, largely reflecting a $8.0 billion increase in commercial as well as a $908 million increase in retail. Compared with March 31, 2020, period-end interest-earning assets increased $2.9 billion, or 2%, primarily driven by a $3.0 billion increase in the investment portfolio. In second quarter 2020, $936 million of education loans were transferred to held for sale in connection with balance sheet optimization strategies. The average effective duration of the securities portfolio decreased to 2.1 years as of June 30, 2020, from 3.3 years at June 30, 2019, and 2.1 years at March 31, 2020, given lower long-term rates that drove an increase in securities prepayment speeds.

Average interest-earning assets of $162.4 billion in second quarter 2020 increased $16.1 billion, or 11%, from second quarter 2019, reflecting a $12.5 billion, or 10%, increase in loans and loans held for sale and a $3.6 billion, or 13%, increase in the investment portfolio. Loan growth includes a $9.5 billion increase in commercial and $1.4 billion increase in retail. Commercial loan growth reflects the $3.4 billion average impact of the PPP loans and the impact of higher line of credit draws tied to COVID-19 disruption, as well as the benefit of geographic, product and client-focused expansion strategies, partially offset by planned reductions in commercial leases. Retail loan growth was driven by education and other retail, partially offset by lower home equity balances and the impact of planned loan sales activity.

Compared with first quarter 2020, average interest-earning assets increased $11.4 billion, or 8%, reflecting a $7.9 billion increase in commercial loans, partially offset by a $199 million decrease in retail loans. Growth in commercial reflects the $3.4 billion average impact of PPP loans and higher line of credit draws. The decline in retail loans reflects continued growth in education more than offset by declines in other categories tied to COVID-19 impacts.

 

12


Citizens Financial Group, Inc.

 

Deposits                         2Q20 change from  
($s in millions)    2Q20      1Q20      2Q19      1Q20     2Q19  
Period-end deposits                         $             %         $             %      

Demand deposits

   $ 40,545      $ 32,398      $ 28,192      $ 8,147       25  %    $ 12,353       44  % 

Checking with interest

     27,200        25,358        25,021        1,842       7       2,179       9  

Savings

     16,665        14,702        13,495        1,963       13       3,170       23  

Money market accounts

     44,965        42,972        35,329        1,993       5       9,636       27  

Term deposits

     14,243        18,045        21,967        (3,802     (21     (7,724     (35
                                                 

Total period-end deposits

   $ 143,618      $ 133,475      $ 124,004      $ 10,143       8  %    $           19,614       16  % 
                                                 

Average deposits

               

Demand deposits

   $ 37,745      $ 29,362      $ 28,389      $ 8,383       29  %    $ 9,356       33  % 

Checking with interest

     26,312        24,612        23,919        1,700       7       2,393       10  

Savings

     15,883        14,201        13,324        1,682       12       2,559       19  

Money market accounts

     45,187        39,839        35,228        5,348       13       9,959       28  

Term deposits

     16,470        18,616        22,292        (2,146     (12     (5,822     (26
                                                 

Total average deposits

   $     141,597      $     126,630      $     123,152      $     14,967       12  %    $ 18,445       15  % 
                                                 

Total period-end deposits of $143.6 billion at June 30, 2020 increased $19.6 billion, or 16%, from June 30, 2019, reflecting growth in demand deposits, money market accounts, savings and checking with interest, partially offset by a decrease in term deposits. Strong deposit growth in second quarter 2020 reflects government stimulus benefiting consumers and small businesses and clients building liquidity.

Compared with March 31, 2020, total period-end deposits increased $10.1 billion, driven by growth in demand deposits, money market accounts, savings and checking with interest, partially offset by a decrease in term deposits. Citizens Access® deposits totaled $6.5 billion at June 30, 2020, which compares with $6.1 billion at March 31, 2020.

Second quarter 2020 average deposits of $141.6 billion increased $18.4 billion, or 15%, from second quarter 2019, reflecting growth in money market accounts, demand deposits, savings and checking with interest partially offset by a decrease in term deposits.

Compared with first quarter 2020, average deposits increased $15.0 billion as growth in demand deposits, money market accounts, checking with interest and savings was partially offset by a decrease in term deposits.

 

Borrowed Funds                       2Q20 change from
           

 

 

 

($s in millions)    2Q20      1Q20      2Q19     1Q20   2Q19
  

 

 

 

 

 

 

 

                    
Period-end borrowed funds                               $           %   $   %
           

 

 

 

 

 

 

 

Short-term borrowed funds

   $ 255      $ 1,059      $ 1,441       $ (804     (76 ) %    $ (1,186     (82 ) % 

Long-term borrowed funds

                 

    FHLB advances

     6        8,007        2,258         (8,001     (100     (2,252     (100

    Senior debt

     7,519        6,775        7,624         744       11       (105     (1

    Subordinated debt and other debt

     1,677        1,655        1,656         22       1                   21       1  
  

 

 

 

   

 

 

 

 
                        

Total borrowed funds

   $ 9,457      $ 17,496      $ 12,979       $ (8,039     (46 ) %    $ (3,522     (27 ) % 
  

 

 

 

   

 

 

 

 
                        

Average borrowed funds

                 

Short-term borrowed funds

   $ 222      $ 644      $ 863       $ (422     (66 ) %    $ (641     (74 ) % 

Long-term borrowed funds

                 

    FHLB advances

     2,595        5,138        3,155         (2,543     (49     (560     (18

    Senior debt

     7,499        7,263        7,573         236       3       (74     (1

    Subordinated debt and other debt

     1,661        1,656        1,658         5             3        
  

 

 

 

   

 

 

 

 
                        

Total average borrowed funds

   $   11,977      $   14,701      $   13,249       $ (2,724     (19 ) %    $ (1,272     (10 ) % 
  

 

 

 

   

 

 

 

 
                        

Total borrowed funds of $9.5 billion at June 30, 2020 decreased $3.5 billion, or 27%, from June 30, 2019, reflecting a $2.3 billion decrease in long-term FHLB borrowings and a $1.2 billion decrease in short-term borrowings. Compared with March 31, 2020, total borrowed funds decreased $8.0 billion, reflecting an $8.0 billion decrease in long-term FHLB borrowings and an $804 million decrease in short-term borrowings, partially offset by a $744 million increase in senior debt. At June 30, 2020, the Company had almost no FHLB borrowings given strong deposit flows during the quarter.

 

13


Citizens Financial Group, Inc.

 

Average borrowed funds of $12.0 billion decreased $1.3 billion, or 10%, from second quarter 2019, largely reflecting a $641 million decrease in short-term borrowings and a $560 million decrease in long-term FHLB borrowings. Compared with March 31, 2020, average borrowed funds decreased $2.7 billion, or 19%, reflecting a $2.5 billion decrease in long-term FHLB borrowings and a $422 million decrease in short-term borrowings, partially offset by a $236 million increase in senior debt.

 

  Capital                    2Q20 change from
  ($s and shares in millions except per share data)    2Q20     1Q20     2Q19   1Q20   2Q19  
 

 

 

 

 

 

 

 
                   
  Period-end capital                    $           %                     $                 %    

  Stockholders’ equity

   $   22,418     $ 21,950     $ 22,017     $ 468       2   $ 401       2  % 

  Stockholders’ common equity

     20,453       20,380       20,884       73             (431     (2

  Tangible common equity

     13,716       13,639       14,141       77       1       (425     (3

  Tangible book value per common share

   $ 32.13     $ 31.97     $ 30.88     $ 0.16       1     $ 1.25       4  

  Common shares - at end of period

     426.8       426.6       457.9       0.2             (31.1     (7

  Common shares - average (diluted)

     427.6       429.4       459.3       (1.8         (31.7     (7 ) % 

  Common equity tier 1 capital ratio(1)

     9.6  %      9.4  %      10.5  %         

  Total capital ratio(1)

     13.1       12.5       13.4          

  Tier 1 leverage ratio(1)

     9.3  %      9.6  %      10.1  %                                                                                         
                                                          
1)

Current reporting-period regulatory capital ratios are preliminary.

At June 30, 2020, our Basel III capital ratios remained well in excess of applicable regulatory requirements with a CET1 capital ratio of 9.6% compared with 9.4% at March 31, 2020 and 10.5% at June 30, 2019, and a total capital ratio of 13.1% compared with 12.5% as of March 31, 2020 and 13.4% as of June 30, 2019. During second quarter 2020, the company issued $400 million of preferred stock that qualifies as additional tier 1 capital.

Tangible book value per common share of $32.13 increased 1% compared with first quarter 2020 and increased 4% from second quarter 2019.

For regulatory capital purposes, in connection with the Federal Reserve’s final interim rule as of April 3, 2020, 100% of the $451 million Day-1 CECL impact recorded as of January 1, 2020 will be deferred over a two-year period ending January 1, 2022, at which time it will be phased in on a pro-rata basis over a three-year period ending January 1, 2025. Additionally, 25% of the cumulative reserve build of $780 million since January 1, 2020, or $195 million, will be phased in over the same time frame.

During second quarter 2020, Citizens paid $168 million in dividends to common shareholders. This compares with $438 million returned to common shareholders through dividends and common share repurchases in first quarter 2020 and $268 million in second quarter 2019.

 

Credit quality review                               2Q20 change from
($s in millions)    2Q20      1Q20      2Q19            1Q20      2Q19

 

      

 

 

    

 

 

                                    $/bps                      %                  $/bps                      %        
             

 

 

    

 

 

Nonaccrual loans and leases      $ 990           $ 780           $ 727            $     210                27   %      $ 263               36 %  
90+ days past due and accruing      55             27             31            28                104             24               77     
Net charge-offs      147             137             106            10                7             41               39     
Provision for credit losses      464             600             97            (136)              (23)            367               NM     
Allowance for credit losses      $   2,527           $   2,210           $   1,320          $ 317                14   %      $ 1,207               91 %  
Nonaccrual loans and leases to loans and leases      0.79   %        0.61   %        0.62          18  bps           17    bps     
Net charge-offs as a % of total loans and leases      0.46             0.46             0.36            —                   10              
Allowance for credit losses to loans and leases      2.01             1.73             1.13            28                   88              
Allowance for credit losses to nonaccrual loans and leases      255.4   %        283.5   %        181.5          NM                   NM              

 

      

 

 

 

14


Citizens Financial Group, Inc.

 

Nonacccrual loans increased $263 million, or 36%, compared with June 30, 2019, as a $287 million increase in commercial, largely driven by energy, retail, education and automotive-related loans, was partially offset by a $24 million decrease in retail. Compared to March 31, 2020, nonaccrual loans of $990 million increased $210 million, or 27%, reflecting a $192 million increase in commercial and an $18 million increase in retail. The nonaccrual loans to loans ratio of 0.79% at June 30, 2020 increased 18 basis points from 0.61% at March 31, 2020 and improved 17 basis points from 0.62% at June 30, 2019.

Net charge-offs of $147 million increased $41 million from second quarter 2019, reflecting a $38 million increase in commercial, and a $3 million increase in retail. Compared with first quarter 2020, net charge-offs increased $10 million driven by a $27 million increase in commercial, partially offset by a $17 million decrease in retail.

Second quarter 2020 net charge-offs were 46 basis points of average loans and leases compared with 36 basis points in second quarter 2019 and 46 basis points in first quarter 2020.

Second quarter 2020 provision for credit losses of $464 million, includes a net reserve build under CECL of $317 million, primarily tied to COVID-19 impacts. In addition, in second quarter 2020 the company transferred $936 million of education loans to held for sale in connection with balance sheet optimization strategies and reallocated approximately $100 million of associated credit reserves to the remaining loan portfolio. First quarter 2020 provision for credit losses of $600 million includes a $463 million net reserve build tied to COVID-19 impacts.

The allowance for credit losses of $2.5 billion includes the $451 million impact of the adoption of CECL on January 1, 2020 and subsequent reserve increases in first and second quarter 2020 totaling $780 million. This compares with a pre-CECL adoption allowance of $1.3 billion at June 30, 2019 and post-CECL adoption allowance of $2.2 billion at March 31, 2020.

The allowance for credit losses to loans and leases ratio was 2.01% as of June 30, 2020, or 2.09% before the impact of PPP loans, compares with 1.13% as of June 30, 2019, and 1.73% as of March 31, 2020. The allowance for credit losses to nonaccrual loans and leases ratio of 255% as of June 30, 2020 compares with 182% as of June 30, 2019, and 283% as of March 31, 2020.

 

15


Citizens Financial Group, Inc.

 

Corresponding Financial Tables and Information

Investors are encouraged to review the foregoing summary and discussion of Citizens’ earnings and financial condition in conjunction with the detailed financial tables and other information available on the Investor Relations portion of the company’s website at www.citizensbank.com/about-us.

Media:    Peter Lucht - 781.655.2289

Investors: Douglas Levy - 203.900.6846

Conference Call

CFG management will host a live conference call today with details as follows:

 

Time:

 

9:00 am ET

Dial-in:

 

(877) 336-4437, conference ID 8419856

Webcast/Presentation: The live webcast will be available at http://investor.citizensbank.com under Events & Presentations.

Replay Information: A replay of the conference call will be available beginning at 12:00 pm ET on July 17 through August 17, 2020. Please dial (866) 207-1041 and enter access code 9745092. The webcast replay will be available at http://investor.citizensbank.com under Events & Presentations.

About Citizens Financial Group, Inc.

Citizens Financial Group, Inc. is one of the nation’s oldest and largest financial institutions, with $179.9 billion in assets as of June 30, 2020. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center and the convenience of approximately 2,700 ATMs and approximately 1,000 branches in 11 states in the New England, Mid-Atlantic and Midwest regions. Consumer Banking products and services include a full range of banking, lending, savings, wealth management and small business offerings. In Commercial Banking, Citizens offers a broad complement of financial products and solutions, including lending and leasing, deposit and treasury management services, foreign exchange, interest rate and commodity risk management solutions, as well as loan syndication, corporate finance, merger and acquisition, and debt and equity capital markets capabilities. More information is available at www.citizensbank.com or visit us on Twitter, LinkedIn or Facebook.

 

16


Citizens Financial Group, Inc.

 

Non-GAAP Financial Measures and Reconciliations

(in millions, except share, per-share and ratio data)

Non-GAAP Financial Measures:

This document contains non-GAAP financial measures denoted as Underlying results. In historical periods, these results may have been referred to as Adjusted or Adjusted/Underlying results. Underlying results for any given reporting period exclude certain items that may occur in that period which Management does not consider indicative of the Company’s on-going financial performance. We believe these non-GAAP financial measures provide useful information to investors because they are used by our Management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our Underlying results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of Underlying results increases comparability of period-to-period results. The following tables present reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measures.

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 such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.

 

17


Citizens Financial Group, Inc.

 

Non-GAAP financial measures and reconciliations

(in millions, except share, per-share and ratio data)

 

          QUARTERLY TRENDS  
                            2Q20 Change  
          2Q20     1Q20     2Q19     1Q20     2Q19  
                            $     %     $     %  
Total revenue, Underlying:                  
Total revenue (GAAP)    A    $ 1,750     $ 1,657     $ 1,628     $ 93       6   $ 122       7
Less: Notable items                                              
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Total revenue, Underlying (non-GAAP)    B    $ 1,750     $ 1,657     $ 1,628     $ 93       6   $ 122       7
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Noninterest expense, Underlying:                  
Noninterest expense (GAAP)    C    $ 979     $ 1,012     $ 951     ($ 33     (3 %)    $ 28       3
Less: Notable items         19       33       7       (14     (42     12       171  
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Noninterest expense, Underlying (non-GAAP)    D    $ 960     $ 979     $ 944     ($ 19     (2 %)    $ 16       2
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Pre-provision profit:                  
Total revenue (GAAP)    A    $ 1,750     $ 1,657     $ 1,628     $ 93      

6%

    $ 122      

7%

 
Less: Noninterest expense (GAAP)    C      979       1,012       951       (33    

(3)

      28      

3

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Pre-provision profit (GAAP)       $ 771     $ 645     $ 677     $ 126      

20%

    $ 94      

14%

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Pre-provision profit, Underlying:                  
Total revenue, Underlying (non-GAAP)    B    $ 1,750     $ 1,657     $ 1,628     $ 93      

6%

    $ 122      

7%

 
Less: Noninterest expense, Underlying (non-GAAP)    D      960       979       944       (19    

(2)

      16      

2

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Pre-provision profit, Underlying (non-GAAP)       $ 790     $ 678     $ 684     $ 112      

17%

    $ 106      

15%

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Income before income tax expense, Underlying:                  
Income before income tax expense (GAAP)    E    $ 307     $ 45     $ 580     $ 262      

NM

    ($ 273    

(47%)

 
Less: Expense before income tax benefit related to notable items         (19     (33     (7     14      

42

      (12    

(171)

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Income before income tax expense, Underlying (non-GAAP)    F    $ 326     $ 78     $ 587     $ 248      

NM

    ($ 261    

(44%)

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Income tax expense, Underlying:                  
Income tax expense (GAAP)    G    $ 54     $ 11     $ 127     $ 43      

NM

    ($ 73    

(57%)

 
Less: Income tax benefit related to notable items         (9     (8     (2     (1    

(13)

      (7    

NM

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Income tax expense, Underlying (non-GAAP)    H    $ 63     $ 19     $ 129     $ 44      

232%

    ($ 66    

(51%)

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Net income, Underlying:                  
Net income (GAAP)    I    $ 253     $ 34     $ 453     $ 219      

NM

    ($ 200    

(44%)

 
Add: Notable items, net of income tax benefit         10       25       5       (15    

(60)

      5      

100

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Net income, Underlying (non-GAAP)    J    $ 263     $ 59     $ 458     $ 204      

NM

    ($ 195    

(43%)

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net income available to common stockholders, Underlying:

                 
Net income available to common stockholders (GAAP)    K    $ 225     $ 12     $ 435     $ 213      

NM

    ($ 210    

(48%)

 
Add: Notable items, net of income tax benefit         10       25       5       (15    

(60)

      5      

100

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   
Net income available to common stockholders, Underlying (non-GAAP)    L    $ 235     $ 37     $ 440     $ 198      

NM

    ($ 205    

(47%)

 
     

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

18


Citizens Financial Group, Inc.

Non-GAAP financial measures and reconciliations (continued)

(in millions, except share, per-share and ratio data

 

          QUARTERLY TRENDS
                      2Q20 Change
          2Q20   1Q20   2Q19   1Q20   2Q19
                      $/bps   %   $/bps   %
Operating leverage:                  
Total revenue (GAAP)    A    $ 1,750     $ 1,657     $ 1,628     $ 93       5.55   $ 122       7.49
Less: Noninterest expense (GAAP)    C      979       1,012       951       (33     (3.41     28       2.89  
             

 

 

 

   

 

 

 

Operating leverage                 8.96       4.60
             

 

 

 

   

 

 

 

Operating leverage, Underlying:                  
Total revenue, Underlying (non-GAAP)    B    $ 1,750     $ 1,657     $ 1,628     $ 93       5.55   $ 122       7.49
Less: Noninterest expense, Underlying (non-GAAP)    D      960       979       944       (19     (2.01     16       1.62  
             

 

 

 

   

 

 

 

Operating leverage, Underlying (non-GAAP)                 7.56       5.87
             

 

 

 

   

 

 

 

Efficiency ratio and efficiency ratio, Underlying:                  
Efficiency ratio    C/A      55.91     61.10     58.41     (519 ) bps        (250 ) bps   
Efficiency ratio, Underlying (non-GAAP)    D/B      54.85       59.08       58.02       (423 ) bps        (317 ) bps   
Effective income tax rate and effective income tax rate, Underlying:                  
Effective income tax rate    G/E      17.69     24.13     21.86     (644 ) bps        (417 ) bps   
Effective income tax rate, Underlying (non-GAAP)    H/F      19.36       24.52       21.89       (516 ) bps        (253 ) bps   
Return on average common equity and return on average common equity, Underlying:                  
Average common equity (GAAP)    M    $ 20,446     $ 20,223     $ 20,420     $ 223       1   $ 26      
Return on average common equity    K/M      4.44     0.24     8.54     420  bps        (410 ) bps   
Return on average common equity, Underlying (non-GAAP)    L/M      4.63       0.74       8.63       389  bps        (400 ) bps   
Return on average tangible common equity and return on average tangible common equity, Underlying:                  
Average common equity (GAAP)    M    $ 20,446     $ 20,223     $ 20,420     $ 223       1   $ 26      
Less: Average goodwill (GAAP)         7,050       7,046       7,040       4             10        
Less: Average other intangibles (GAAP)         65       67       80       (2     (3     (15     (19
Add: Average deferred tax liabilities related to goodwill (GAAP)         375       374       370       1             5       1  
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Average tangible common equity    N    $ 13,706     $ 13,484     $ 13,670     $ 222       2   $ 36      
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Return on average tangible common equity    K/N      6.62     0.36     12.75     626  bps        (613 ) bps   
Return on average tangible common equity, Underlying (non-GAAP)    L/N      6.90       1.10       12.89       580  bps        (599 ) bps   
Return on average total assets and return on average total assets, Underlying:                  
Average total assets (GAAP)    O    $ 179,793     $ 167,177     $ 161,489     $ 12,616       8   $ 18,304       11
Return on average total assets    I/O      0.57     0.08     1.13     49  bps        (56 ) bps   
Return on average total assets, Underlying (non-GAAP)    J/O      0.59       0.14       1.14       45  bps        (55 ) bps   
Return on average total tangible assets and return on average total tangible assets, Underlying:                  
Average total assets (GAAP)    P    $ 179,793     $ 167,177     $ 161,489     $ 12,616       8   $ 18,304       11
Less: Average goodwill (GAAP)         7,050       7,046       7,040       4             10        
Less: Average other intangibles (GAAP)         65       67       80       (2     (3     (15     (19
Add: Average deferred tax liabilities related to goodwill (GAAP)         375       374       370       1             5       1  
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Average tangible assets    Q    $ 173,053     $ 160,438     $ 154,739     $ 12,615       8   $ 18,314       12
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Return on average total tangible assets    I/Q      0.59     0.09     1.17     50  bps        (58 ) bps   
Return on average total tangible assets, Underlying (non-GAAP)    J/Q      0.61       0.15       1.19       46  bps        (58 ) bps   

 

19


Citizens Financial Group, Inc.

Non-GAAP financial measures and reconciliations (continued)

(in millions, except share, per-share and ratio data)

 

          QUARTERLY TRENDS
                      2Q20 Change
          2Q20   1Q20   2Q19   1Q20   2Q19
                      $/bps   %   $/bps   %
Tangible book value per common share:                  
Common shares - at period-end (GAAP)    R      426,824,594       426,586,533       457,903,826       238,061           (31,079,232     (7 %)   
Common stockholders’ equity (GAAP)         $20,453       $20,380       $20,884       $73             ($431     (2

Less: Goodwill (GAAP)

        7,050       7,050       7,040                   10        
Less: Other intangible assets (GAAP)         63       66       74       (3     (5     (11     (15
Add: Deferred tax liabilities related to goodwill (GAAP)         376       375       371       1             5       1  
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

Tangible common equity

   S      $13,716         $13,639         $14,141         $77         1     ($425 )       (3 %) 
     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 

Tangible book value per common share

   S/R      $32.13       $31.97       $30.88       $0.16       1     $1.25       4
Net income per average common share - basic and diluted and net income per average common share - basic and diluted, Underlying:

 

           
Average common shares outstanding - basic (GAAP)    T      426,613,053       427,718,421       458,154,335       (1,105,368         (31,541,282     (7 %) 
Average common shares outstanding - diluted (GAAP)    U      427,566,920       429,388,855       459,304,224       (1,821,935           (31,737,304     (7
Net income per average common share - basic (GAAP)    K/T      $0.53       $0.03       $0.95       $0.50       NM       ($0.42     (44
Net income per average common share - diluted (GAAP)    K/U      0.53       0.03       0.95       0.50       NM       (0.42     (44
Net income per average common share - basic, Underlying (non-GAAP)    L/T      0.55       0.09       0.96       0.46       NM       (0.41     (43
Net income per average common share - diluted, Underlying (non-GAAP)    L/U      0.55       0.09       0.96       0.46       NM       (0.41     (43

 

20


Citizens Financial Group, Inc.

Non-GAAP financial measures and reconciliations (continued)

(in millions, except share, per-share and ratio data)

 

     QUARTERLY TRENDS
                    2Q20 Change
     2Q20    1Q20    2Q19    1Q20   2Q19
                    $/bps   %   $/bps   %

Salaries and employee benefits, Underlying:

                 

Salaries and employee benefits (GAAP)

     $513        $549        $507        ($36     (7 %)      $6       1

Less: Notable items

     4        10        2        (6     (60     2       100  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Salaries and employee benefits, Underlying (non-GAAP)

             $509                 $539                 $505                 ($30 )       (6 %)      $4       1
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Equipment and software expense, Underlying:

                 

Equipment and software expense (GAAP)

     $142        $133        $126        $9       7     $16       13

Less: Notable items

            1               (1     (100            
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Equipment and software expense, Underlying (non-GAAP)

     $142        $132        $126        $10       8     $16       13
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Outside services, Underlying:

                 

Outside services (GAAP)

     $131        $135        $118        ($4     (3 %)      $13       11

Less: Notable items

     12        18        5        (6     (33     7       140  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Outside services, Underlying (non-GAAP)

     $119        $117        $113        $2       2     $6       5
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Occupancy, Underlying:

                 

Occupancy (GAAP)

     $82        $84        $82        ($2     (2 %)       $—      

Less: Notable items

     3        4               (1     (25     3       100  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

Occupancy, Underlying (non-GAAP)

     $79        $80        $82        ($1     (1 %)      ($3 )       (4 %)  
  

 

 

 

  

 

 

 

  

 

 

 

  

 

 

 

   

 

 

 

 

 

21


Citizens Financial Group, Inc.

 

Non-GAAP financial measures and reconciliations - Underlying excluding the impact of reserve build

(in millions, except share, per-share and ratio data)

 

        QUARTERLY TRENDS
                    2Q20 Change
        2Q20   1Q20   2Q19   1Q20   2Q19
       

 

 

 

 

 

  $/bps   %   $/bps   %
Net income available to common shareholders, Underlying excluding reserve build:                
Net income available to common shareholders (GAAP)   A     $225       $12       $435       $213       NM       ($210     (48 %)  
Add: Notable items       10       25       5       (15     (60     5       100  
Add: Impact of COVID-19       255       365             (110     (30     255       100  
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Net income available to common shareholders, Underlying excluding reserve build (non-GAAP)   B     $490       $402       $440       $88       22     $50       11
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Return on average tangible common equity, Underlying excluding reserve build:                
Average common equity (GAAP)       $20,446       $20,223       $20,420       $223       1     $26      
Less: Average goodwill (GAAP)       7,050       7,046       7,040       4             10        
Less: Average other intangibles (GAAP)       65       67       80       (2     (3     (15     (19
Add: Average deferred tax liabilities related to goodwill (GAAP)       375       374       370       1             5       1  
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Average tangible common equity   C     $13,706       $13,484       $13,670       $222       2     $36      
   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Return on average tangible common equity   A/C     6.62 %       0.36 %       12.75 %       626  bps        (613 ) bps   
Return on average tangible common equity, Underlying excluding reserve build (non-GAAP)   B/C     14.37       12.00       12.89       237  bps        1   bps   
Net income per average common share - basic and diluted, Underlying excluding reserve build:                
Average common shares outstanding - basic (GAAP)   D       426,613,053         427,718,421         458,154,335         (1,105,368           (31,541,282 )       (7 %) 
Average common shares outstanding - diluted (GAAP)   E     427,566,920       429,388,855       459,304,224       (1,821,935           (31,737,304     (7
Net income per average common share - basic (GAAP)   A/D     $0.53       $0.03       $0.95       $0.50       NM       ($0.42     (44
Net income per average common share - diluted (GAAP)   A/E     0.53       0.03       0.95       0.50       NM       (0.42     (44
Net income per average common share - basic, Underlying excluding reserve build (non-GAAP)   B/D     1.15       0.94       0.96       0.21       22       0.19       20  
Net income per average common share - diluted, Underlying excluding reserve build (non-GAAP)   B/E     1.14       0.94       0.96       0.20       21       0.18       19  

 

22


Citizens Financial Group, Inc.

 

Non-GAAP financial measures and reconciliations - Excluding the impact of PPP loans

(in millions, except share, per-share and ratio data

 

                QUARTERLY TRENDS
                     2Q20 Change
         2Q20   1Q20   2Q19   1Q20   2Q19
                     $/bps   %   $/bps   %
Total loans, excluding the impact of PPP loans:                 
Total loans (GAAP)   A      $125,713       $127,528       $116,838       ($1,815     (1 %)       $8,875       8
Less: PPP loans        4,679                   4,679       100       4,679       100  
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Total loans, excluding the impact of PPP loans (non-GAAP)   B      $121,034       $127,528       $116,838       ($6,494     (5 %)      $4,196       4
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Total deposits (GAAP)   C          $143,618           $133,475           $124,004           $10,143       8         $19,614       16
Allowance for credit losses (GAAP)   D      $2,527       $2,210       $1,320       $317       14     $1,207       91
Average loans, excluding the impact of PPP loans:                 
Average loans (GAAP)   E      $128,755       $121,055       $117,783       $7,700       6     $10,972       9
Less: PPP loans        3,407                   3,407       100       3,407       100  
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Average loans, excluding the impact of PPP loans (non-GAAP)   F      $125,348       $121,055       $117,783       $4,293       4     $7,565       6
    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   

 

 

 

 
Average deposits (GAAP)   G      $141,597       $126,630       $123,152       $14,967       12     $18,445       15
Ratios:                 
Allowance for credit losses to total loans (GAAP)   D/A      2.01     1.73     1.13     28   bps        88   bps   
Allowance for credit losses to total loans, excluding the impact of PPP loans (non-GAAP)   D/B      2.09     1.73     1.13     36   bps        96   bps   
Loans-to-deposits ratio (period-end balances) (GAAP)   A/C      87.53     95.54     94.22     (801 ) bps        (669 ) bps   
Loans-to-deposits ratio (period-end balances), excluding the impact of PPP loans (non-GAAP)   B/C      84.27     95.54     94.22     (1,127 ) bps        (995 ) bps   
Loans-to-deposits ratio (average balances) (GAAP)   E/G      90.93     95.60     95.64     (467 ) bps        (471 ) bps   
Loans-to-deposits ratio (average balances), excluding the impact of PPP loans (non-GAAP)   F/G      88.53     95.60     95.64     (707 ) bps              (711 ) bps         

 

23


Citizens Financial Group, Inc.

 

Forward-Looking Statements

This document contains forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends, as well as the potential effects of the COVID-19 pandemic on our business, operations, financial performance and prospects, are forward-looking statements. Also, 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 and political 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, and changes in the competitive environment;

 

   

Our ability to implement our business strategy, including the cost savings and efficiency components, and achieve our financial performance goals;

 

   

The COVID-19 pandemic and its effects on the economic and business environments in which we operate;

 

   

Our ability to meet heightened supervisory requirements and expectations;

 

   

Liabilities and business restrictions resulting from litigation and regulatory investigations;

 

   

Our capital and liquidity requirements under regulatory capital standards and our ability to generate capital internally or raise capital on favorable terms;

 

   

The effect of changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale;

 

   

Changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets;

 

   

The effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin;

 

   

Financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses;

 

   

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.

 

24


Citizens Financial Group, Inc.

 

In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends. Further, statements about the effects of the COVID-19 pandemic on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us.

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 our Annual Report on Form 10-K for the year ended December 31, 2019 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

Note: Per share amounts and ratios presented in this document are calculated using whole dollars.

CFG-IR

 

25

EX-99.2

Slide 1

2Q20 Financial Results July 17, 2020 Exhibit 99.2


Slide 2

Forward-looking statements and use of non-GAAP financial measures Forward-Looking Statements. This document contains forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995. Statements regarding potential future share repurchases and future dividends, as well as the potential effects of the COVID-19 pandemic on our business, operations, financial performance and prospects, are forward-looking statements. Also, 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 and political 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, and changes in the competitive environment; Our ability to implement our business strategy, including the cost savings and efficiency components, and achieve our financial performance goals; The COVID-19 pandemic and its effects on the economic and business environments in which we operate; Our ability to meet heightened 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 U.S. Basel III capital rules) and our ability to generate capital internally or raise capital on favorable terms; The effect of changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; Changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in the primary and secondary markets; The effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; Financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses; A failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber-attacks; and Management’s ability to identify and manage these and other risks. In addition to the above factors, we also caution that the actual amounts and timing of any future common stock dividends or share repurchases will be subject to various factors, including our capital position, financial performance, capital impacts of strategic initiatives, market conditions, and regulatory and accounting considerations, as well as any other factors that our Board of Directors deems relevant in making such a determination. Therefore, there can be no assurance that we will repurchase shares or pay any dividends to holders of our common stock, or as to the amount of any such repurchases or dividends. Further, statements about the effects of the COVID-19 pandemic on our business, operations, financial performance and prospects may constitute forward-looking statements and are subject to the risk that the actual impacts may differ, possibly materially, from what is reflected in those forward-looking statements due to factors and future developments that are uncertain, unpredictable and in many cases beyond our control, including the scope and duration of the pandemic, actions taken by governmental authorities in response to the pandemic, and the direct and indirect impact of the pandemic on our customers, third parties and us. Further, statements about the estimated impact of CECL are forward-looking statements and are subject to the risk that the actual impact of CECL may differ, possibly materially, from what is reflected in those statements due to, among other things, changes in macroeconomic conditions and any of the other variables discussed, as well as changes based on continuing review of models and assumptions. 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 our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for the period ending March 31, 2020. Non-GAAP Financial Measures: This document contains non-GAAP financial measures denoted as Underlying results and Underlying excluding the impact of COVID-19 on the provision for credit losses. In historical periods, these results may have been referred to as Adjusted or Adjusted/Underlying results. Underlying results for any given reporting period exclude certain items that may occur in that period which Management does not consider indicative of the Company’s on-going financial performance. We believe these non-GAAP financial measures provide useful information to investors because they are used by our Management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our Underlying results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of Underlying results increases comparability of period-to-period results. The Appendix presents reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measures. Underlying excluding the impact of COVID-19 on the provision for credit losses reflects information valuable to investors given the outsized impact of the COVID-19 pandemic which is not expected to have a similar ongoing impact to our results given the timing of the impact of adoption of CECL and the unprecedented nature of the COVID-19 pandemic. 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 such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.


Slide 3

2Q20 GAAP financial summary See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 4

Prudently managing credit Allowance to loans of 2.01%, or 2.09% excluding PPP loans(1), reflects CECL day-1 implementation and provision impact from COVID-19 disruptions; compares with 1.73% in 1Q20 and 1.13% in 2Q19 Nonaccrual loans of 0.79% of loans compares with 0.61% in 1Q20 and 0.62% in 2Q19 Nonaccrual loan coverage ratio of 255% reflects CECL day-1 impact and compares with 283% in 1Q20 and 182% in 2Q19 Continued progress on strategic growth and efficiency initiatives Average loan growth of 9% YoY and 6% QoQ, including PPP loans of $4.7 billion at quarter-end and impact of commercial line draws Average deposits up 15% YoY and 12% QoQ; Period-end deposits up 16% YoY and 8% QoQ, outpacing loan growth Deposit cost discipline continues, down 65 bps YoY and down 37 bps QoQ Consumer Banking – 7% loan growth(2) YoY, up 10% before planned loan sale. Funding kept pace, with 7% deposit growth YoY, including DDA up 30%; record fee income in mortgage banking Commercial Banking – Loan growth(2) of 13% YoY driven by geographic, product and client-focused expansion strategies and line of credit utilization tied to COVID-19 disruption; deposits up 38% YoY; continue to build out industry verticals and corporate finance capabilities TOP 6 program progressing well with target of ~$300-$325 million pre-tax run-rate benefit by YE 2021. Planning underway to add significant new efficiency initiatives Continuing to fund major strategic initiatives; looking for new opportunities arising from the current environment Executive summary Strong capital, liquidity and funding Strong capital levels with a CET1 ratio of 9.6%(3) Period-end LDR ratio of 87.5%, or 84.3% excluding PPP loans(1), vs. 94.2% a year ago Total available liquidity of ~$68 billion at June 30, 2020 Solid performance notwith-standing COVID-19 disruption Underlying net income available to common of $235 million, with EPS of $0.55(1) compares with $0.96 in second quarter 2019 and $0.09 in first quarter 2020 Results include COVID-19-driven provision expense impact of $0.59 per share; Underlying EPS of $1.14 before COVID-19-driven reserve build compares with $0.94 for first quarter 2020 on same basis(1) Record revenue of $1.7 billion up 7% YoY and up 6% QoQ demonstrates benefit of our diversification in a challenging environment NII stable YoY with interest-earning asset growth of 11% NIM of 2.88% down 33 bps YoY; down 22 bps QoQ, with interest-bearing deposit costs down 46 bps Record noninterest income up 28% YoY; up 19% QoQ Record mortgage banking fees; Solid underlying performance in capital markets and FX & IRP despite COVID-19 disruptions Underlying efficiency ratio of 54.9%(1) compares with 58.0% in 2Q19 and 59.1% in 1Q20; 5.9%(1) Underlying positive operating leverage YoY Provision expense of $464 million reflects $317 million net CECL reserve build tied to COVID-19 impacts; in addition, ~$100 million of reserves associated with planned loan sale were reallocated to the remaining loan portfolio Underlying ROTCE of 6.9%(1) compares with 12.9% in 2Q19 and 1.1% in 1Q20; TBV/share of $32 up 4% YoY and 1% QoQ See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 5

Highlights 2Q20 Underlying financial summary(1) Linked quarter: Underlying net income available to common of $235 million, with EPS of $0.55; TBV/share of $32.13 up 1% Provision for credit losses of $464 million includes $317 million reserve build ($0.59 EPS) tied to the impact of COVID-19 NII stable, as the benefit of interest-earning asset growth and improved funding mix was partially offset by the impact of lower interest rates Record noninterest income of $590 million increased 19% reflecting record mortgage banking fees and higher capital markets and FX & IRP. Service charges and fees, card fees and trust and investment services fees were lower reflecting COVID-19 impacts Underlying noninterest expense decreased $19 million, or 2%, largely reflecting seasonally lower salaries and employee benefits expense, partially offset by higher equipment and software expense Underlying effective tax rate of 19.4% Prior-year quarter: Underlying net income available to common of $235 million, with EPS of $0.55; TBV/share up 4% NII relatively stable, reflecting lower funding costs and 11% growth in interest-earning assets, offset by the impact of the lower rate and challenging yield-curve environment on asset yields Record noninterest income up $128 million, or 28%, driven by record mortgage banking fees and strength in capital markets fees. FX & IRP reflects good underlying business performance despite difficult market conditions. Service charges and fees, card fees and trust and investment services fees were lower reflecting COVID-19 impacts Underlying noninterest expense up $16 million, or 2%, reflecting higher equipment and software expense given continued investments in growth initiatives, as well as continued strong expense discipline See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. See page 3 for reported results. $s in millions


Slide 6

Highlights Net interest income Linked quarter: NII was stable Positively impacted by interest-earning asset growth and improved funding mix, offset by the impact of lower interest rates NIM of 2.88% decreased 22 bps, reflecting: ~21 basis point negative impact of lower rates ~8 basis point negative impact of asset mix, including higher cash balances given strong deposit flows and PPP loan yields ~7 basis point improvement given disciplined deposit pricing and improved deposit mix Interest bearing deposit costs down 46 bps Prior-year quarter: NII was broadly stable Lower funding costs and 11% growth in interest-earning assets was offset by the impact of the lower rate and challenging yield curve environment on asset yields NIM of 2.88% decreased 33 bps Reflects impact of lower interest rates and higher cash balances given strong deposit flows in 2Q20 Partially offset by lower funding costs and improved mix as well as continued mix shift towards better-returning loans Net interest income $s in millions, except earning assets Average interest-earning assets Net interest income Net interest margin, FTE


Slide 7

Noninterest income Highlights Linked quarter: Record noninterest income, up 19%, reflecting record results in mortgage banking, as well as higher capital markets and FX & IRP fees Record mortgage banking fees of $276 million up $117 million, reflecting strong origination volumes and improved gain on sale margins Capital markets fees increased $18 million reflecting a $14 million mark-to-market recovery on loan/bond trading assets and higher debt and equity underwriting activity, partially offset by lower syndication fees FX & IRP fees of $34 million, increased $10 million reflecting an $8 million improvement in credit valuation adjustment; also reflects higher IRP sales given increased client activity Trust and investment services fees of $45 million lower by $8 million given COVID-19 impacts on sales Services charges and fees and card fees were materially lower given impacts from COVID-19 disruption Prior-year quarter: Record noninterest income, up 28%, driven by record results in mortgage banking and higher capital markets fees Record mortgage banking fees up $214 million, reflecting increased origination volumes and improved gain on sale margins Capital market fees increased $4 million, reflecting higher debt and equity underwriting activity and a $14 million mark-to-market gain on loan/bond trading assets, partially offset by lower loan syndication fees Trust and investment services fees decreased $8 million reflecting COVID-19 impacts on sales Services charges and fees and card fees were materially lower given impacts from COVID-19 disruption Other income declined from second quarter 2019 levels that included gains related to asset dispositions and efficiency initiatives $s in millions Mortgage banking fees Noninterest income 2Q20 change from Underlying, as applicable 2Q20 1Q20 2Q19 1Q20 2Q19 $ % $ % Service charges and fees 84 $ 118 $ 126 $ (34) $ (29) % (42) $ (33) % Mortgage banking fees 276 159 62 117 74 214 NM Card fees 48 56 64 (8) (14) (16) (25) Capital markets fees 61 43 57 18 42 4 7 Trust and investment services fees 45 53 53 (8) (15) (8) (15) FX and interest rate products 34 24 35 10 42 (1) (3) Letter of credit and loan fees 31 34 33 (3) (9) (2) (6) Securities gains, net 3 — 4 3 100 (1) (25) Other income 8 10 28 (2) (20) (20) (71) Noninterest income 590 $ 497 $ 462 $ 93 $ 19 % 128 $ 28 %


Slide 8

$s in millions Noninterest expense Highlights Linked quarter: Underlying noninterest expense decreased $19 million, or 2%, reflecting seasonally lower salaries & benefits Underlying salaries and employee benefits decreased $30 million, or 6%, largely reflecting seasonal reductions in payroll taxes, 401(k) matching and stock-based compensation costs FTEs increased 3% to ~18,300 driven by Mortgage volumes Underlying equipment and software expense up $10 million, or 8%, reflecting increased technology spend Underlying outside services increased $2 million, or 2%, tied to growth initiatives Prior-year quarter: Underlying noninterest expense up $16 million, or 2%, reflecting the impact of ongoing investments in growth initiatives as well as the benefit of continued expense discipline Underlying salaries and employee benefits relatively stable Underlying equipment and software expense up $16 million, or 13%, driven by increased technology spend Underlying outside services expense up $6 million, or 5%, reflecting investments in growth initiatives Underlying occupancy decreased $3 million, or 4%, reflecting expense discipline and the benefit of TOP efficiency initiatives Underlying other expense decreased $7 million, largely driven by lower travel-related expense due to the pandemic See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. See page 29 for noninterest expense reported results detail and page 3 for efficiency ratio reported results. Underlying efficiency ratio(1)


Slide 9

Average loans and leases Highlights YoY loan growth á 10% á 3% á 17% Total core Total core retail Total core commercial Total core commercial loans and leases Total core retail loans (2) Linked quarter: Core loans and leases up $7.7 billion, or 6%, largely reflecting higher commercial line of credit utilization tied to COVID-19 disruptions and PPP loans Core commercial loans increased $7.9 billion, or 13%, reflecting COVID-19-related line of credit utilization impact of $3.9 billion and PPP loan impact of $3.4 billion Commercial line utilization of ~40% at quarter end compared to ~50% at 1Q20 given repayments Core retail loans relatively stable reflecting growth in education offset by decreases in home equity, auto and unsecured Period-end loans decreased $1.8 billion, or 1%; $0.9 billion decrease before the impact of $936 million transfer of education loans to held for sale Total core loan yields decreased 60 bps due to the impact of lower rates Prior-year quarter: Core loans and leases up $11.4 billion, or 10% largely reflecting higher commercial line of credit utilization tied to COVID-19 disruptions and PPP loans Core commercial up $9.8 billion, or 17%, reflecting COVID-19-related line of credit utilization impact of $4.9 billion, the $3.4 billion PPP loan impact and growth in commercial real estate Core retail loans up $1.6 billion, or 3%, reflecting growth in education and other retail, partially offset by lower home equity and the impact of mortgage loan sales Period-end loan growth of $8.9 billion, or 8%, reflects 14% growth in commercial, including impact of higher line of credit utilization and PPP loans, and 2% growth in retail Total core loan yields decreased 102 bps given the impact of lower rates See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. $s in billions


Slide 10

Linked quarter: Total deposits up $15.0 billion, or 12% Growth in demand deposits, money market accounts, checking with interest and savings, partially offset by a decrease in term deposits Citizens Access® deposits of $6.5 billion at quarter end Period-end deposit growth of $10.1 billion, or 8%, reflects the impact of government stimulus as well as corporate clients building liquidity Total deposit costs decreased 37 bps, reflecting proactive pricing discipline; interest-bearing deposits down 46 bps Total cost of funds decreased 40 bps, reflecting a shift in funding mix towards deposits from borrowings, proactive pricing discipline and the benefit of lower rates Prior-year quarter: Total deposits up $18.4 billion, or 15% Growth in money market accounts, demand deposits, savings and checking with interest, partially offset by a decrease in term deposits Total deposit costs decreased 65 bps, reflecting the impact of lower rates and favorable shift in deposit mix Period-end deposit growth of $19.6 billion, or 16%, reflects the impact of government stimulus as well as corporate clients building liquidity Total cost of funds decreased 72 bps, given improved funding mix from deposit growth and lower rates Average funding and cost of funds Highlights $s in billions Average interest-bearing liabilities and DDA(1) Long-term borrowed funds ST borrowed funds Term deposits Checking with interest DDA Money market & savings See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 11

Nonaccrual loans to total loans ratio of 0.79% compares with 0.61% in 1Q20 and 0.62% in 2Q19 Nonaccrual loans of $990 million increased $210 million, or 27%, QoQ, reflecting a $192 million increase in commercial and an $18 million increase in retail; Nonaccrual loans increased $263 million, or 36% YoY Net charge-offs increased $10 million QoQ, given a $27 million increase in commercial, partially offset by a $17 million decrease in retail given the impact of forbearance. Net charge-off ratio stable QoQ at 0.46% Allowance for credit losses of $2.5 billion includes a $451 million increase recorded upon the January 1, 2020 adoption of CECL, a $317 million reserve build in 2Q20 and a $463 million reserve build in 1Q20 associated with COVID-19 impacts. Compares with $2.2 billion in 1Q20 and $1.3 billion in 2Q19 Allowance for credit losses to total loans of 2.01%, or 2.09% excluding PPP loans(3), compares with 1.73% in 1Q20 and 1.13% in 2Q19 Allowance for credit losses to nonaccrual loans coverage ratio of 255% compares with 283% in 1Q20 and 182% in 2Q19 Provision for credit losses of $464 million reflects $317 million net reserve build primarily associated with COVID-19 impacts; in addition, ~$100 million of reserves associated with planned loan sale were reallocated to the remaining loan portfolio; compares with $463 million reserve build in 1Q20 Credit quality(1) $s in millions Nonaccrual loans Allowance for credit losses Highlights Provision for credit losses, net charge-offs Provision for credit losses Total net c/os Net c/o ratio See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. (3) (2)


Slide 1

Supporting customers and clients in need while prudently managing risk Forbearance summary See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. Pace of new forbearance requests has slowed dramatically across all consumer loan categories and early trends are encouraging: Broadly stable early-stage delinquency trends for loans not in forbearance Meaningful percentage of customers in forbearance continue to pay Proactive customer outreach to evaluate readiness to return to payment or need for further assistance ~93% current at time of initial forbearance request Working proactively with Commercial Bank customers seeking flexibility on loan terms and conditions $s in billions $4.7 billion PPP loan balance at June 30, 2020 Customer profile skews to small businesses ~$98,000 average loan size ~84% of loans under $100,000 ~93% of loans for companies with under 25 employees Over 540,000 jobs supported Expect high percentage to be forgiven over third and fourth quarter PPP lending 2


Slide 13

2Q20 provision expense of $464 million Includes CECL-related reserve build primarily tied to COVID-19 impacts of $317 million, or $0.59 per share ACL/loan ratio improved 28 bps to 2.01%; ACL/loan ratio excluding PPP loans improved 36 bps to 2.09%(2) Reserves relatively evenly distributed across Retail and Commercial portfolios Notwithstanding sizable reserve build, CET1 ratio improved 20 bps to 9.6% given robust PPNR growth and no share repurchases Strong capital position permits meaningful capacity if further reserve build necessary For illustrative purposes, a reduction in the CET1 ratio to 9.50% for an incremental reserve build would deliver a 2.33% ACL/loan ratio ex-PPP; i.e., each 10 bps decrease in CET1 for reserve build translates to a ~24 bps increase in ACL/loan ratio Macroeconomic Forecast(1) Utilized May 13 Moody’s Baseline scenario, which reflects 2Q20 GDP down ~33%, with peak unemployment of ~15%, followed by a gradual recovery in 2H20 This scenario is more severe than 1Q20 which had 2Q GDP down ~18% and peak unemployment of ~9% The macro scenario was adjusted for the estimated benefits of fiscal stimulus, Fed programs and forbearance While depth of recession and recovery path are clearer than at Q1 close, significant future uncertainty still exists Key Variables Real GDP Unemployment Rate Case-Shiller Home Price Index Total of 9 major variables utilized, with hundreds of individual inputs CECL provision reflects impact from COVID-19 disruption Highlights CECL methodology and key variables See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. Allowance for credit losses


Slide 14

2Q20 CET1 ratio of 9.6%(3) increased 20 bps from 1Q20 while incorporating CECL reserve build of $317 million Net income: 17 bp increase RWA decline: 11 bp increase Dividends and other: 8 bp decrease LDR of 87.5%, or 84.3% excluding PPP loans, compares with 95.5% in 1Q20(1)(2) Issued $400 million of preferred stock in 2Q20 that qualifies as additional tier 1 capital Previously announced suspension of stock repurchase program through December 31, 2020 Capital and liquidity remain strong Highlights Capital Ratio trend Loan-to-deposit ratio(2) See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 15

Strong reserve, capital & PPNR relative to stress losses Strong capital and allowance level plus PPNR generation provides substantial coverage of severe loss scenarios See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. Observations Maintaining strong capital and credit reserve levels $2.5B allowance for credit losses ~$2.5B excess CET1 capital based on preliminary stress capital buffer (“SCB”); ~$3.4B pre-tax equivalent ACL provides significant coverage of potential credit losses across a range of stressful scenarios Current allowance for credit losses plus excess CET1 capital (pre-tax basis) exceeds Company-run 2020 severely adversely losses by ~$1 billion before PPNR generation Resilient PPNR sufficient to cover difference between $6.7 billion Fed-run 2020 severely adverse losses and ~$5.9 billion loss coverage capacity before PPNR Bank Holding Company-run 2020 DFAST severely adverse loss rate of 4.2%; historically in-line or better than peer average Fed-run 2020 DFAST severely adverse credit loss rate of 5.6% in-line with peer average $s in billions Estimated excess CET1 capital above preliminary SCB (pre-tax)(1) Allowance for credit losses Company-run severely adverse stress loss rates 2014-2020 2020 Severely adverse loss coverage capacity before PPNR ~$5.9 ~ ~ (2)


Slide 16

2020 DFAST severely adverse PPNR as % of average assets CFG Fed-run Peer Average Fed-run CFG Company-run CFG 1H20 (1) Commentary: Fed severely adverse stress test results Citizens continues to demonstrate resiliency through current real-life stress See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. Fed CCAR/DFAST results illustrate strong capital position and further improvements to balance sheet and business model Preliminary SCB of 3.4% indicated by Fed for CFG is above peer average of 2.6%; company views elevated SCB level as not representative of CFG’s improved business model We are following the SCB reconsideration process to address Fed methodology issues: PPNR model reflects data from earlier periods when Citizens was owned by a foreign bank, ineligible for TARP and forced to reduce balance sheet which lowered profitability. Does not appropriately weight improvements over time, including recent acquisitions Fed models 2.3% PPNR % of average assets for CFG, well below peer average of 3.3% and first half 2020 actual of 3.7% Credit loss methodology overstates potential losses by not considering certain counterparty loss-sharing obligations and favorable loan characteristics Observations 2020 DFAST severely adverse credit loss rate CFG Fed-run Peer Average Fed-run CFG Company-run (1)


Slide 17

2Q20 YoY Strategic initiatives update Fee growth Consumer Enhance mortgage platform Record mortgage banking fees; originations up 87% and gain on sale margins improved 196 bps to 3.09% Expand wealth Resilient trust and investment services fees; Managed money revenue up 10%; Households up 4% Commercial Expand Capital & Global Markets capabilities Record bond & equity underwriting fees, up 112% Interest rate products ex-CVA up 27% Build out Treasury Solutions Continued investment in digital and payments offerings and infrastructure Foundational initiatives TOP 6 and BSO Transformational TOP 6 program on track - targeting ~$300-$325 million in pre-tax run-rate benefit by year-end 2021; adding significant new efficiency initiatives - digitization of customer interactions/ops, other initiatives for post-COVID-19 environment Improve portfolio mix and reposition certain portfolios Core education, personal unsecured and merchant financing up 25% Developing originate-to-distribute model; planned $936 million education loan sale Continue to recycle capital toward better-return commercial relationships Optimize deposit mix Proactive IBD pricing, down 46 bps QoQ; Strong DDA growth, with Consumer DDA balances up 30% YoY Strategic revenue initiatives Expand CitizensAccess® Recalibrating to current rate environment and continuing to develop an integrated national value proposition Reinvent the payment experience at point of sale Continued momentum with merchant partners, focusing on new, strategic verticals Initiating live pilot on customer-led POS value proposition Integrate digital offerings for small business customers Committed to initiative; temporarily paused to focus on serving small business customers through the COVID-19 crisis, including the SBA PPP Strategic & business highlights Group Announced $10 million investment to promote social equity and advance economic opportunity in underserved communities Funded $4.7 billion of SBA-PPP loans supporting over 540,000 jobs Achieved ‘Outstanding’ Community Reinvestment Act Rating Consumer Accelerating transformation of branch capabilities to improve customer and colleague engagement New Citizens Bank mobile app rollout beginning July Launched SpeciFi Save & GrowTM and won Digital Initiative of the Year Commercial Continued top-10 overall middle market lead/joint lead bookrunner by number of transactions Continuing to build out high yield fixed income business launched in 2019 Celent Model Bank Award for Commercial Bank Transformation


Slide 18

FY2020 outlook vs. FY2019 Net interest income Broadly stable vs. FY19 including the benefit of PPP program Expect strong loan growth to offset meaningful decrease in NIM due to rates Noninterest income Up meaningfully vs. FY19, as strength in mortgage is expected to more than offset COVID-19 weakness in other categories Noninterest expense Up modestly vs. FY19 Provision expense Greatest potential for variability; will depend on pace of recovery Loans/Deposits Expect strong loan growth vs. FY19 given commercial line draws, government programs like PPP and increased demand in education and merchant financing Strong increase in commercial and retail deposits; in general, heightened liquidity given zero interest rate policy and Fed initiatives Capital Capital ratios projected to strengthen from 2Q20 levels as net income and the suspension of buybacks in 2020 more than offset the increase in RWAs Expect capital ratios to remain strong and above required minimums even in more severe scenarios Liquidity & Funding Projected to remain strong and stable We offer commentary on factors influencing FY2020 outlook for key categories


Slide 19

3Q20 outlook vs. 2Q20 See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. We offer commentary on factors influencing key categories


Slide 20

Key messages Citizens 2Q20 results demonstrate strength and resiliency of franchise, along with continued strong execution Underlying results reflect the benefit of Citizens diversified business model Record fee income driven by record results in mortgage banking Continuing excellent performance across loans, deposits, liquidity and capital Positive operating leverage year over year of 5.9%; 54.9% efficiency ratio(1) Excluding reserve build, EPS of $1.14 and ROTCE of 14.4%(1) Citizens remains well capitalized and maintains ample liquidity Robust capital levels with CET1 ratio of 9.6%(2), up 20 bps QoQ ACL/loans of 2.01%, 2.09% excluding PPP loans(1) Deposit growth of $15.0 billion linked quarter, with spot LDR of 84.3% excluding PPP loans(1) TBV/share of $32.13 up 4% YoY and 1% QoQ Committed to serving our customers and communities Originated $4.7 billion of PPP loans, helping support over 540,000 jobs Committed $10 million to promote social equity and drive economic advancement in underserved communities Continue to make progress on our strategic initiatives, while incorporating changes from the environment Adding significant new efficiency initiatives, including acceleration of digitization of customer interactions/operations Seeking to come out of crisis with positive momentum See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 21

Appendix


Slide 22

Underlying results pre and post CECL reserve build(1) See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. See page 3 for reported results. $s in millions 2Q20 Income Statement and EPS


Slide 23

Allocation of allowance by product type See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. See page 3 for reported results. $s in millions Allowance for credit losses coverage ratio ex PPP increased 36 bps in 2Q20 and 26 bps in 1Q20 after CECL adoption


Slide 24

Commercial credit – diversified portfolio with prudent credit discipline Overall Highly granular and diversified portfolio in terms of geography, industry and asset class Experienced leadership team focused on portfolios most heavily impacted by COVID-19 and low energy prices Robust client-level cash flow analysis performed on each segment to inform underlying strategies Industries of Market Concern (Boxed) ~10% of Total CFG (down ~$1 billion) Potential risk mitigants include: CRE Retail and Hospitality is well diversified geographically, with some markets expected to perform better than others over time ~74% of Food Services in fast/fast casual concepts – likely better positioned to manage social distancing via take out and drive-through ~63% of Retail Trade is lower-risk gas stations, convenience stores and other essential services expected to recover more quickly ~62% of Energy & Related in less-price sensitive sectors Significant client hedges in place for more price sensitive areas, ~76% of price risk is hedged through YE20, with ~51% through YE21 ~49% of Arts, Entertainment & Recreation Sports to sports teams and stadiums Low historic loss rates given contractual revenues from cable broadcasters $s in billions Highlights See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28.


Slide 25

Commercial credit – update on industries of market concern 2Q20 Balance ex-PPP % of total CFG   Non-accrual Industry sectors $ %   Commentary   CRE - Retail and hospitality $ 2.5 2 % $ 0.05 2.15 % Focused on larger, well-capitalized institutional and upper middle market clients; diversified geographically Project-specific monitoring as well as delinquency, vacancy and absorption rates Accommodation and Food Services 4.2 3 0.04 1.07 ~74% Food Services is fast food and fast casual; better positioned given takeout and drive-through capabilities Franchisees benefit from franchisor support with rent deferrals and other concessions Accommodation clients will experience most significant disruption, though majority entered shutdown with significant liquidity Accommodation 1.4 1 - - Food Services and Drinking Places 2.8 2 0.04 1.59 Retail Trade 2.8 2   < 0.01 0.06   ~63% tied to lower-risk essential retail services not materially impacted such as gas stations, convenience and grocery stores Closely monitoring impacts of resurgence and “hot spots” across geographies Energy & Related 2.7 2 0.06 2.12 Well diversified portfolio with ~145 clients; ~38% more price-sensitive Monitoring midstream volume and counterparty exposure Arts, Entertainment, and Recreation 1.6 1   < 0.01 0.27   ~49% to sports teams and stadiums; low historic loss rates given contractual network and broadcast revenue Majority of Amusement, Gambling and Recreation clients have significant liquidity Total industries of market concern(1) $ 13.8 10 % $ 0.16 1.18 % Total commercial $ 64.9 52 % $ 0.51 0.78 % Working proactively with clients and remain ready to support our clients’ needs See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described on page 28. $s in billions


Slide 26

Retail credit - diversified portfolio with prudent credit discipline Highlights ~70% of the retail portfolio is secured Mortgage weighted-average LTV of 62% with ~3% of the portfolio with refreshed FICO scores <650 ~50% of the HELOC portfolio is secured by 1st lien ~72% of HELOC has CLTV <70; ~93% CLTV < 80 Took proactive action in 2017 to limit national auto footprint to larger multi-dealers by reducing states and eliminating small dealerships Limited exposure to higher-risk, longer- duration loans Education refinance portfolio borrowers at origination have been employed ~6 years on average with: ~30% co-sign ~60% have advanced degrees Education InSchool ~90% co-sign Vast majority of merchant partnership subject to loss sharing arrangements $s in billions


Slide 27

Retail credit – portfolio and forbearance detail Retail performance reflects Citizens strong underlying credit quality and prudent underwriting discipline and we remain ready to assist our customers through navigating these challenges 2Q20 % of total Nonaccrual In forbearance Portfolios Balance CFG   $s %   $s %   Commentary   Residential mortgage $ 19.2 15 % $ 0.11  0.58 % $ 1.1 5.6 % Weighted-average refreshed FICO of ~785; LTV of ~62% Home equity 12.5 10 0.25 2.02 0.4 3.3 ~50% secured by 1st lien; weighted-average FICO of ~765; ~93% with CLTV < 80% Monitoring utilization and will continue to monitor as unemployment rates remain elevated Auto 12.0 10   0.07  0.56   1.0  8.1 Purchase only, no leasing; weighted average FICO ~730 Tightened origination credit box Education 10.6 8 0.02 0.17 0.9  8.7 Weighted-average FICO of ~780 and co-sign rate of ~50% InSchool portfolio FICO of ~775; ~90% co-sign rate Refinance portfolio FICO of ~780; ~30% co-sign rate Credit card 1.9 2 0.02 1.11 0.0 2.3 Weighted average of FICO of ~735 Other Retail 4.5 4   0.01 0.26   0.2  4.0 Performance remains steady, reflecting the relatively low payment amounts and automated payment Loss-share arrangements offer strong protection Total Retail $ 60.8 48 % $ 0.48  0.80 % $ 3.5  6.0 % $s in billions


Slide 28

Notable Items(1) First and second quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives. First and second quarter 2020 and second quarter 2019 results also reflect notable items related to integration costs primarily tied to the August 1, 2018 Franklin American Mortgage Company ("FAMC") acquisition. These notable items have been excluded from reported results to better reflect Underlying operating results. Cumulative after-tax integration costs related to the FAMC acquisition totaled $32 million through the end of second quarter 2020. See pages 38-39 for notes and important information on Non-GAAP Financial Measures, including “Underlying” results. “Underlying” results exclude the impact of notable items described above.


Slide 29

GAAP noninterest income and noninterest expense summary $s in millions GAAP 2Q20 change from Noninterest expense 2Q20 1Q20 2Q19 1Q20 2Q19 $ % $ % Service charges and fees 84 $ 118 $ 126 $ (34) $ (29) % (42) $ (33) % Mortgage banking fees 276 159 62 117 74 214 NM Card fees 48 56 64 (8) (14) (16) (25) Capital markets fees 61 43 57 18 42 4 7 Trust and investment services fees 45 53 53 (8) (15) (8) (15) FX and interest rate products 34 24 35 10 42 (1) (3) Letter of credit and loan fees 31 34 33 (3) (9) (2) (6) Securities gains, net 3 — 4 3 100 (1) (25) Other income 8 10 28 (2) (20) (20) (71) Noninterest income 590 $ 497 $ 462 $ 93 $ 19 % 128 $ 28 %


Slide 30

Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data


Slide 31

Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data


Slide 32

Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data


Slide 33

Non-GAAP financial measures and reconciliations $s in millions, except share, per share and ratio data


Slide 34

$s in millions, except share, per share and ratio data Non-GAAP financial measures and reconciliations


Slide 35

Non-GAAP financial measures and reconciliations – Underlying excluding the reserve build $s in millions, except share, per share and ratio data


Slide 36

Non-GAAP financial measures and reconciliations – Underlying excluding the reserve build $s in millions, except share, per share and ratio data


Slide 37

Non-GAAP financial measures and reconciliations – Underlying excluding the impact of PPP Loans $s in millions, except share, per share and ratio data


Slide 38

Notes on Non-GAAP Financial Measures See important information on Non-GAAP Financial Measures at the beginning and end of this presentation for an explanation of our use of these non-GAAP financial measures and their reconciliations to GAAP financial measures. “Underlying” or “Adjusted” results exclude the impact of notable items. Where there is a reference to Underlying results in a paragraph or table, all measures that follow these references are on the same basis, when applicable. References to “Underlying results before the impact of Acquisitions” exclude the impact acquisitions that occurred after second quarter 2018 and notable items. General Notes References to net interest margin are on a fully taxable equivalent ("FTE") basis. In 1Q19, Citizens changed its quarterly presentation of net interest income and net interest margin (NIM). Consistent with our understanding of general peer practice, the Company simplified the calculation of its reported NIM to equal net interest income, annualized based on the actual number of days in the period, divided by average total interest earning assets for the period. Under the Company’s prior methodology, NIM was calculated using the difference between the annualized yield on average total interest-earning assets and total interest-bearing liabilities for the period. The Company also began presenting both net interest income and NIM on an FTE basis. Prior periods have been revised consistent with the current presentation. Beginning in the first quarter of 2019, borrowed funds balances and the associated interest expense are based on original maturity. Prior periods have been adjusted to conform with the current period presentation. References to “Underlying results before the impact of Acquisitions” exclude the impact of acquisitions occurring after 2Q18 and notable items. Throughout this presentation, references to consolidated and/or commercial loans and loan growth include leases. Loans held for sale are also referred to as LHFS. Select totals may not sum due to rounding. Current period regulatory capital ratios based on Basel III standardized approach are preliminary. Any mention of EPS refers to diluted EPS. Throughout this presentation, references to balance sheet items are on an average basis and loans exclude held for sale unless otherwise noted. Notes on slide 3 – 2Q20 GAAP financial summary See above general note a). In 3Q18, we revised our method of calculating the loan-to-deposit ratio to exclude loans held for sale, consistent with general industry practice. Prior periods have been adjusted to conform with current period presentation. Full-time equivalent employees. Notes on slide 4 – Executive summary See above note on non-GAAP financial measures. See above general note h). See above general note f). Notes on slide 5 – 2Q20 Underlying financial summary See above note on non-GAAP financial measures. Notes on slide 8 – Noninterest expense See above note on non-GAAP financial measures. Notes on slide 9 – Average loans and leases See above general note e). Non-core loans are primarily liquidating loan and lease portfolios inconsistent with our strategic priorities, generally as a result of geographic location, industry, product type or risk level and are included in Other. Notes on slide 10 – Average funding and cost of funds See above note on non-GAAP financial measures. Notes on slide 11 – Credit quality Beginning in the fourth quarter of 2019, nonperforming balances exclude both fully and partially guaranteed residential mortgage loans sold to Ginnie Mae for which the Company has the right, but not the obligation, to repurchase. Prior periods have been adjusted to exclude partially guaranteed amounts to conform with the current period presentation. Allowance for credit losses to nonperforming loans and leases. See above note on non-GAAP financial measures. Notes on slide 12 – Supporting customers and clients in need while prudently managing risk Represents loans in which principal and/or interest was suspended for COVID-19 relief Represents portion of the portfolio granted forbearance; percentage based on principal balances. Notes on slide 13 – CECL provision reflects impact from COVID-19 disruption Macroeconomic forecast over 2-year reasonable and supportable period. Total of 9 major variables utilized, with hundreds of individual inputs. Proprietary macroeconomic forecast is underpinned by Moody’s COVID-19 consensus forecast supplemented with adjustments based on alternate economic scenarios. See above note on non-GAAP financial measures. Notes on slide 14 – Capital and liquidity remain strong See above general note f). Period-end loan-to-deposit ratio, excluding loans held for sale. Notes on slide 15 – Strong reserve, capital & PPNR relative to stress losses Pretax equivalent estimated based on 25% tax rate Represents Bank Holding Company-run severely adverse scenario credit loss rates. 2014-2017 peer average includes BBT, CMA, FITB, KEY, MTB, PNC, RF, STI, and USB; 2018 peer average excludes CMA. 2019 peer average includes PNC and USB only. 2020 peer average includes PNC, TFC and USB. Notes on slide 16 – Commentary: Fed severely adverse stress test results Represents annualized pre-provision profit for first half 2020 as % of 9-quarter average assets used in 2020 DFAST Notes


Slide 39

Notes on slide 19 – 3Q20 vs. 2Q20 outlook See above note on non-GAAP financial measures. Notes on slide 20 – Key messages See above note on non-GAAP financial measures. See above general note f). Notes on slide 22 – Underlying results per and post CECL reserve build See above note on non-GAAP financial measures. Notes on slide 23 – Allocation of allowance by product type Includes commercial leases. Notes on slide 24 – Commercial credit – diversified portfolio with prudent credit discipline All other includes sectors with a balance less than 1% of total CFG loans. See above general note e. Notes on slide 25 – Commercial Credit – update on industries of market concern See above general note e. Notes on slide 28 – Notable items See above note on non-GAAP financial measures. Notes continued


Slide 40

EX-99.3
Table of Contents

Exhibit 99.3

 

 

LOGO

 

Financial Supplement

Second Quarter 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

1


Table of Contents

Table of Contents

   Page  

Consolidated Financial Highlights

     3  

Consolidated Statements of Operations (unaudited)

     5  

Consolidated Balance Sheets (unaudited)

     6  

Loans and Deposits

     7  

Average Balance Sheets

     8  

Average Annualized Yields and Rates

     9  

Segment Financial Highlights

     10  

Credit-Related Information:

  

Nonaccrual loans and leases

     14  

Loans and Leases 90 Days or More Past Due and Accruing

     15  

Charge-offs, Recoveries and Related Ratios

     16  

Summary of Changes in the Components of the Allowance for Credit Losses

     18  

Capital and Ratios

     19  

Non-GAAP Financial Measures and Reconciliations

     20  

The information in this Financial Supplement is preliminary and based on company data available at the time of the earnings presentation. It speaks only as of the particular date or dates included in the accompanying pages. The Company does not undertake an obligation to, and disclaims any duty to, update any of the information provided. Any forward-looking statements in this Financial Supplement are subject to the forward-looking statements language contained in the Company’s reports filed with the SEC pursuant to the Securities Exchange Act of 1934, which can be found on the SEC’s website (www.sec.gov) or on the Company’s website (www.citizensbank.com). The Company’s future financial performance is subject to the risks and uncertainties described in its SEC filings.

 

2


Table of Contents

CONSOLIDATED FINANCIAL HIGHLIGHTS

(in millions, except share, per-share and ratio data)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

SELECTED OPERATING DATA

                         

Total revenue

  $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       6   $ 122       7   $ 3,407     $ 3,216     $ 191       6

Noninterest expense

    979       1,012       986       973       951       (33     (3     28       3       1,991       1,888       103       5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Profit before provision for credit losses

    771       645       651       665       677       126       20       94       14       1,416       1,328       88       7  

Provision for credit losses

    464       600       110       101       97       (136     (23     367       NM       1,064       182       882       NM  

NET INCOME

    253       34       450       449       453       219       NM       (200     (44     287       892       (605     (68

Net income, Underlying1

    263       59       454       453       458       204       NM       (195     (43     322       901       (579     (64

Net income available to common stockholders

    225       12       427       432       435       213       NM       (210     (48     237       859       (622     (72

Net income available to common stockholders, Underlying1

    235       37       431       436       440       198       NM       (205     (47     272       868       (596     (69

PER COMMON SHARE DATA

                         

Basic earnings

  $ 0.53     $ 0.03     $ 0.98     $ 0.97     $ 0.95     $ 0.50       NM     ($ 0.42     (44 %)    $ 0.56     $ 1.87     ($ 1.31     (70 %) 

Diluted earnings

    0.53       0.03       0.98       0.97       0.95       0.50       NM       (0.42     (44     0.55       1.86       (1.31     (70

Basic earnings, Underlying1

    0.55       0.09       0.99       0.98       0.96       0.46       NM       (0.41     (43     0.64       1.89       (1.25     (66

Diluted earnings, Underlying1

    0.55       0.09       0.99       0.98       0.96       0.46       NM       (0.41     (43     0.64       1.88       (1.24     (66

Cash dividends declared and paid per common share

    0.39       0.39       0.36       0.36       0.32       —         —         0.07       22       0.78       0.64       0.14       22  

Book value per common share

    47.92       47.78       47.63       46.67       45.61       0.14       —         2.31       5       47.92       45.61       2.31       5  

Tangible book value per common share

    32.13       31.97       32.08       31.48       30.88       0.16       1       1.25       4       32.13       30.88       1.25       4  

Dividend payout ratio

    74     1,398     37     37     34     NM         NM         140     34     NM    

Dividend payout ratio, Underlying1

    71       451       36       37       33       NM         NM         122       34       NM    

COMMON SHARES OUTSTANDING

                         

Average: Basic

    426,613,053       427,718,421       434,684,606       445,703,987       458,154,335       (1,105,368     —       (31,541,282     (7 %)      427,165,737       459,426,685       (32,260,948     (7 %) 

Diluted

    427,566,920       429,388,855       436,500,829       447,134,595       459,304,224       (1,821,935     —         (31,737,304     (7     428,292,580       460,857,535       (32,564,955     (7

Common shares at period-end

    426,824,594       426,586,533       433,121,083       443,913,525       457,903,826       238,061       —         (31,079,232     (7     426,824,594       457,903,826       (31,079,232     (7

 

1 

These are non-GAAP financial measures. For further information on these measures, refer to “Non-GAAP Financial Measures and Reconciliations.”

 

3


Table of Contents

CONSOLIDATED FINANCIAL HIGHLIGHTS, CONTINUED

(in millions, except ratio and headcount data)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

FINANCIAL RATIOS

                         

Net interest margin

    2.87     3.09     3.04     3.10     3.20     (22 ) bps        (33 ) bps        2.98     3.22     (24 ) bps   

Net interest margin, FTE1

    2.88       3.10       3.06       3.12       3.21       (22 ) bps        (33 ) bps        2.99       3.23       (24 ) bps   

Return on average common equity

    4.44       0.24       8.30       8.35       8.54       420  bps        (410 ) bps        2.35       8.58       (623 ) bps   

Return on average common equity, Underlying2

    4.63       0.74       8.36       8.45       8.63       389  bps        (400 ) bps        2.69       8.67       (598 ) bps   

Return on average tangible common equity

    6.62       0.36       12.39       12.44       12.75       626  bps        (613 ) bps        3.51       12.87       (936 ) bps   

Return on average tangible common equity, Underlying2

    6.90       1.10       12.49       12.58       12.89       580  bps        (599 ) bps        4.03       13.00       (897 ) bps   

Return on average total assets

    0.57       0.08       1.08       1.10       1.13       49  bps        (56 ) bps        0.33       1.12       (79 ) bps   

Return on average total assets, Underlying2

    0.59       0.14       1.09       1.11       1.14       45  bps        (55 ) bps        0.37       1.13       (76 ) bps   

Return on average total tangible assets

    0.59       0.09       1.13       1.15       1.17       50  bps        (58 ) bps        0.35       1.17       (82 ) bps   

Return on average total tangible assets, Underlying2

    0.61       0.15       1.14       1.16       1.19       46  bps        (58 ) bps        0.39       1.18       (79 ) bps   

Effective income tax rate

    17.69       24.13       16.76       20.46       21.86       (644 ) bps        (417 ) bps        18.51       22.14       (363 ) bps   

Effective income tax rate, Underlying2

    19.36       24.52       21.52       22.29       21.89       (516 ) bps        (253 ) bps        20.36       22.16       (180 ) bps   

Efficiency ratio

    55.91       61.10       60.28       59.40       58.41       (519 ) bps        (250 ) bps        58.43       58.70       (27 ) bps   

Efficiency ratio, Underlying2

    54.85       59.08       58.02       58.22       58.02       (423 ) bps        (317 ) bps        56.91       58.34       (143 ) bps   

Noninterest income as a % of total revenue

    34     30     30     30     28     400  bps        600  bps        32     28     400  bps   

CAPITAL RATIOS - PERIOD-END (PRELIMINARY)

                         

CET1 capital ratio

    9.6     9.4     10.0     10.3     10.5                

Tier 1 capital ratio

    10.9       10.5       11.1       11.1       11.3                  

Total capital ratio

    13.1       12.5       13.0       13.0       13.4                  

Tier 1 leverage ratio

    9.3       9.6       10.0       9.9       10.1                  

Tangible common equity ratio

    7.9       8.0       8.7       8.9       9.1                  

SELECTED BALANCE SHEET DATA

                         

Loans-to-deposits ratio (period-end balances)

    87.53     95.54     95.03     94.52     94.22     (801 ) bps        (669 ) bps        87.53     94.22     (669 ) bps   

Loans-to-deposits ratio (average balances)

    90.93       95.60       94.63       94.62       95.64       (467 ) bps        (471 ) bps        93.13       96.65       (352 ) bps   

Full-time equivalent colleagues

    18,312       17,863       17,997       18,116       18,207       449       3       105       1       18,312       18,207       105       1  

 

1 

Net interest income and net interest margin is presented on a fully taxable-equivalent (“FTE”) basis using the federal statutory tax rate of 21%. The FTE impact is predominantly attributable to commercial loans for the periods presented.

2 

These are non-GAAP financial measures. For further information on these measures, refer to “Non-GAAP Financial Measures and Reconciliations.”

 

4


Table of Contents

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in millions)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $     %     $     %                 $     %  

INTEREST INCOME

                         

Interest and fees on loans and leases

  $ 1,192     $ 1,302     $ 1,312     $ 1,356     $ 1,392     ($ 110     (8 %)    ($ 200     (14 %)    $ 2,494     $ 2,773     ($ 279     (10 %) 

Interest and fees on loans held for sale

    20       15       18       19       15       5       33       5       33       35       26       9       35  

Interest and fees on other loans held for sale

    7       9       5       2       2       (2     (22     5       250       16       6       10       167  

Investment securities

    130       147       159       153       164       (17     (12     (34     (21     277       330       (53     (16

Interest-bearing deposits in banks

    1       5       7       8       7       (4     (80     (6     (86     6       15       (9     (60
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total interest income

    1,350       1,478       1,501       1,538       1,580       (128     (9     (230     (15     2,828       3,150       (322     (10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

INTEREST EXPENSE

                         

Deposits

    124       227       263       297       308       (103     (45     (184     (60     351       595       (244     (41

Short-term borrowed funds

    —         1       2       2       4       (1     (100     (4     (100     1       6       (5     (83

Long-term borrowed funds

    66       90       93       94       102       (24     (27     (36     (35     156       223       (67     (30
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total interest expense

    190       318       358       393       414       (128     (40     (224     (54     508       824       (316     (38
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net interest income

    1,160       1,160       1,143       1,145       1,166       —         —         (6     (1     2,320       2,326       (6     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

NONINTEREST INCOME

                         

Service charges and fees

    84       118       128       128       126       (34     (29     (42     (33     202       249       (47     (19

Mortgage banking fees

    276       159       80       117       62       117       74       214       NM       435       105       330       NM  

Card fees

    48       56       64       67       64       (8     (14     (16     (25     104       123       (19     (15

Capital markets fees

    61       43       66       39       57       18       42       4       7       104       111       (7     (6

Trust and investment services fees

    45       53       52       50       53       (8     (15     (8     (15     98       100       (2     (2

Foreign exchange and interest rate products

    34       24       49       35       35       10       42       (1     (3     58       71       (13     (18

Letter of credit and loan fees

    31       34       35       34       33       (3     (9     (2     (6     65       66       (1     (2

Securities gains, net

    3       —         4       3       4       3       100       (1     (25     3       12       (9     (75

Other income

    8       10       16       20       28       (2     (20     (20     (71     18       53       (35     (66
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total noninterest income

    590       497       494       493       462       93       19       128       28       1,087       890       197       22  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

TOTAL REVENUE

    1,750       1,657       1,637       1,638       1,628       93       6       122       7       3,407       3,216       191       6  

Provision for credit losses

    464       600       110       101       97       (136     (23     367       NM       1,064       182       882       NM  

NONINTEREST EXPENSE

                         

Salaries and employee benefits

    513       549       502       508       507       (36     (7     6       1       1,062       1,016       46       5  

Equipment and software expense

    142       133       133       130       126       9       7       16       13       275       251       24       10  

Outside services

    131       135       142       128       118       (4     (3     13       11       266       228       38       17  

Occupancy

    82       84       88       80       82       (2     (2     —         —         166       165       1       1  

Other operating expense

    111       111       121       127       118       —         —         (7     (6     222       228       (6     (3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total noninterest expense

    979       1,012       986       973       951       (33     (3     28       3       1,991       1,888       103       5  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income before income tax expense

    307       45       541       564       580       262       NM       (273     (47     352       1,146       (794     (69

Income tax expense

    54       11       91       115       127       43       NM       (73     (57     65       254       (189     (74
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income

  $ 253     $ 34     $ 450     $ 449     $ 453     $ 219       NM     ($ 200     (44 %)    $ 287     $ 892     ($ 605     (68 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income, Underlying1

  $ 263     $ 59     $ 454     $ 453     $ 458     $ 204       NM     ($ 195     (43 %)    $ 322     $ 901     ($ 579     (64 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income available to common stockholders

  $ 225     $ 12     $ 427     $ 432     $ 435     $ 213       NM     ($ 210     (48 %)    $ 237     $ 859     ($ 622     (72 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income available to common stockholders, Underlying1

  $ 235     $ 37     $ 431     $ 436     $ 440     $ 198       NM     ($ 205     (47 %)    $ 272     $ 868     ($ 596     (69 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

1 

These are non-GAAP financial measures. For further information on these measures, refer to “Non-GAAP Financial Measures and Reconciliations.”

 

5


Table of Contents

CONSOLIDATED BALANCE SHEETS (unaudited)

(in millions)

 

PERIOD-END BALANCES    AS OF     JUNE 30, 2020 CHANGE  
     Jun 30, 2020     Mar 31, 2020     Dec 31, 2019     Sept 30, 2019     Jun 30, 2019     March 31, 2020     June 30, 2019  
                                   $     %     $     %  

ASSETS

                  

Cash and due from banks

   $ 1,088     $ 1,155     $ 1,175     $ 1,638     $ 996     ($ 67     (6 %)    $ 92       9

Interest-bearing cash and due from banks

     6,358       2,903       2,211       2,204       2,039       3,455       119       4,319       212  

Interest-bearing deposits in banks

     475       280       297       158       186       195       70       289       155  

Debt securities available for sale, at fair value

     22,144       22,307       20,613       21,502       21,698       (163     (1     446       2  

Debt securities held to maturity

     2,856       3,071       3,202       3,319       3,447       (215     (7     (591     (17

Equity securities, at fair value

     50       47       47       47       47       3       6       3       6  

Equity securities, at cost

     607       927       807       734       706       (320     (35     (99     (14

Loans held for sale, at fair value

     3,631       2,911       1,946       1,993       1,750       720       25       1,881       107  

Other loans held for sale

     1,362       350       1,384       22       455       1,012       NM       907       199  

Loans and leases

     125,713       127,528       119,088       117,880       116,838       (1,815     (1     8,875       8  

Less: Allowance for loan and lease losses

     (2,448     (2,171     (1,252     (1,263     (1,227     (277     (13     (1,221     (100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Net loans and leases

     123,265       125,357       117,836       116,617       115,611       (2,092     (2)       7,654       7  

Derivative assets

     2,069       1,968       807       1,027       833       101       5       1,236       148  

Premises and equipment

     751       746       761       747       740       5       1       11       1  

Bank-owned life insurance

     1,739       1,736       1,725       1,720       1,711       3       —         28       2  

Goodwill

     7,050       7,050       7,044       7,044       7,040       —         —         10       —    

Due from broker

     51       —         —         257       249       51       100       (198     (100

Other assets

     6,378       5,911       5,878       5,333       5,241       467       8       1,137       22  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

TOTAL ASSETS

   $ 179,874     $ 176,719     $ 165,733     $ 164,362     $ 162,749     $ 3,155       2%     $ 17,125       11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

LIABILITIES AND STOCKHOLDERS’ EQUITY

                  

LIABILITIES

                  

Deposits:

                  

Noninterest-bearing

   $ 40,545     $ 32,398     $ 29,233     $ 29,939     $ 28,192     $ 8,147       25   $ 12,353       44

Interest-bearing

     103,073       101,077       96,080       94,775       95,812       1,996       2       7,261       8  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total deposits

     143,618       133,475       125,313       124,714       124,004       10,143       8       19,614       16  

Short-term borrowed funds

     255       1,059       274       1,077       1,441       (804     (76     (1,186     (82

Derivative liabilities

     198       234       120       161       106       (36     (15     92       87  

Deferred taxes, net

     709       782       866       752       767       (73     (9     (58     (8

Long-term borrowed funds:

                  

FHLB advances

     6       8,007       5,008       3,007       2,258       (8,001     (100     (2,252     (100

Senior debt

     7,519       6,775       7,382       8,143       7,624       744       11       (105     (1

Subordinated debt and other debt

     1,677       1,655       1,657       1,656       1,656       22       1       21       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total long-term borrowed funds

     9,202       16,437       14,047       12,806       11,538       (7,235     (44     (2,336     (20

Due to broker

     155       —         —         206       257       155       100       (102     (100

Other liabilities

     3,319       2,782       2,912       2,795       2,619       537       19       700       27  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

TOTAL LIABILITIES

     157,456       154,769       143,532       142,511       140,732       2,687       2       16,724       12  

STOCKHOLDERS’ EQUITY

                  

Preferred stock:

                  

$25.00 par value, 100,000,000 shares authorized for each of the periods presented

     1,965       1,570       1,570       1,133       1,133       395       25       832       73  

Common stock:

                  

$0.01 par value, 1,000,000,000 shares authorized for each of the periods presented

     6       6       6       6       6       —         —         —         —    

Additional paid-in capital

     18,908       18,901       18,891       18,876       18,860       7       —         48       —    

Retained earnings

     6,068       6,011       6,498       6,229       5,959       57       1       109       2  

Treasury stock, at cost

     (4,623     (4,623     (4,353     (3,953     (3,453     —         —         (1,170     (34

Accumulated other comprehensive income (loss)

     94       85       (411     (440     (488     9       11       582       NM  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

TOTAL STOCKHOLDERS’ EQUITY

     22,418       21,950       22,201       21,851       22,017       468       2       401       2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 179,874     $ 176,719     $ 165,733     $ 164,362     $ 162,749     $ 3,155       2%     $ 17,125       11
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Memo: Total tangible common equity

   $ 13,716     $ 13,639     $ 13,893     $ 13,976     $ 14,141     $ 77       1   ($ 425     (3 %) 

 

6


Table of Contents

LOANS AND DEPOSITS

(in millions)

 

PERIOD-END BALANCES    AS OF      JUNE 30, 2020 CHANGE  
     Jun 30, 2020      Mar 31, 2020      Dec 31, 2019      Sept 30, 2019      Jun 30, 2019      Mar 31, 2020     June 30, 2019  
                                        $     %     $     %  

LOANS AND LEASES

                       

Commercial

   $ 48,017      $ 49,092      $ 41,479      $ 41,356      $ 41,156      ($ 1,075     (2 %)    $ 6,861       17

Commercial real estate

     14,485        14,502        13,522        12,820        13,123        (17     —         1,362       10  

Leases

     2,428        2,438        2,537        2,557        2,684        (10     —         (256     (10
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total commercial loans and leases

     64,930        66,032        57,538        56,733        56,963        (1,102     (2     7,967       14  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Residential mortgages

     19,245        18,721        19,083        19,699        19,192        524       3       53       —    

Home equity

     12,541        12,992        13,154        13,423        13,640        (451     (3     (1,099     (8

Automobile

     12,028        12,157        12,120        12,070        12,000        (129     (1     28       —    

Education

     10,591        10,887        10,347        9,729        9,305        (296     (3     1,286       14  

Other retail

     6,378        6,739        6,846        6,226        5,738        (361     (5     640       11  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total retail loans

     60,783        61,496        61,550        61,147        59,875        (713     (1     908       2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total loans and leases

   $ 125,713      $ 127,528      $ 119,088      $ 117,880      $ 116,838      ($ 1,815     (1 %)    $ 8,875       8
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Loans held for sale, at fair value

     3,631        2,911        1,946        1,993        1,750        720       25       1,881       107  

Other loans held for sale

     1,362        350        1,384        22        455        1,012       NM       907       199  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Loans and leases and loans held for sale

   $ 130,706      $ 130,789      $ 122,418      $ 119,895      $ 119,043      ($ 83     —     $ 11,663       10
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

DEPOSITS

                       

Demand

   $ 40,545      $ 32,398      $ 29,233      $ 29,939      $ 28,192      $ 8,147       25   $ 12,353       44

Checking with interest

     27,200        25,358        24,840        24,403        25,021        1,842       7       2,179       9  

Regular savings

     16,665        14,702        13,779        13,479        13,495        1,963       13       3,170       23  

Money market accounts

     44,965        42,972        38,725        36,826        35,329        1,993       5       9,636       27  

Term deposits

     14,243        18,045        18,736        20,067        21,967        (3,802     (21     (7,724     (35
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

Total deposits

   $ 143,618      $ 133,475      $ 125,313      $ 124,714      $ 124,004      $ 10,143       8   $ 19,614       16
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

     

 

 

   

 

7


Table of Contents

AVERAGE BALANCE SHEETS

(in millions)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $     %     $     %                 $     %  

ASSETS

                         

Interest-bearing cash and due from banks and deposits in banks

  $ 5,231     $ 1,859     $ 1,970     $ 1,474     $ 1,229     $ 3,372       181   $ 4,002       NM     $ 3,545     $ 1,362     $ 2,183       160
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Taxable investment securities

    25,180       25,339       25,305       25,635       25,620       (159     (1     (440     (2     25,259       25,379       (120     —    

Non-taxable investment securities

    4       4       5       5       5       —         —         (1     (20     4       5       (1     (20
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total investment securities

    25,184       25,343       25,310       25,640       25,625       (159     (1     (441     (2     25,263       25,384       (121     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Investment securities and interest-bearing deposits

    30,415       27,202       27,280       27,114       26,854       3,213       12       3,561       13       28,808       26,746       2,062       8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Commercial

    50,443       43,152       42,012       41,476       41,755       7,291       17       8,688       21       46,797       41,659       5,138       12  

Commercial real estate

    14,540       13,876       13,103       12,892       13,379       664       5       1,161       9       14,208       13,325       883       7  

Leases

    2,426       2,482       2,546       2,615       2,745       (56     (2     (319     (12     2,454       2,809       (355     (13
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total commercial loans and leases

    67,409       59,510       57,661       56,983       57,879       7,899       13       9,530       16       63,459       57,793       5,666       10  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Residential mortgages

    18,872       18,866       19,495       19,405       19,232       6       —         (360     (2     18,869       19,163       (294     (2

Home equity

    12,736       13,042       13,265       13,501       13,754       (306     (2     (1,018     (7     12,889       13,913       (1,024     (7

Automobile

    11,998       12,173       12,099       12,036       11,984       (175     (1     14       —         12,085       12,026       59       —    

Education

    11,183       10,610       9,888       9,459       9,235       573       5       1,948       21       10,897       9,153       1,744       19  

Other retail

    6,557       6,854       6,497       5,873       5,699       (297     (4     858       15       6,706       5,668       1,038       18  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total retail loans

    61,346       61,545       61,244       60,274       59,904       (199     —         1,442       2       61,446       59,923       1,523       3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total loans and leases

    128,755       121,055       118,905       117,257       117,783       7,700       6       10,972       9       124,905       117,716       7,189       6  

Loans held for sale, at fair value

    2,710       1,890       2,209       1,970       1,528       820       43       1,182       77       2,300       1,283       1,017       79  

Other loans held for sale

    510       799       517       134       158       (289     (36     352       223       655       175       480       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total interest-earning assets

    162,390       150,946       148,911       146,475       146,323       11,444       8       16,067       11       156,668       145,920       10,748       7  

Allowance for loan and lease losses

    (2,172     (1,708     (1,260     (1,226     (1,247     (464     (27     (925     (74     (1,940     (1,245     (695     (56

Goodwill

    7,050       7,046       7,044       7,044       7,040       4       —         10       —         7,048       7,029       19       —    

Other noninterest-earning assets

    12,525       10,893       9,951       9,817       9,373       1,632       15       3,152       34       11,709       9,251       2,458       27  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

TOTAL ASSETS

  $ 179,793     $ 167,177     $ 164,646     $ 162,110     $ 161,489     $ 12,616       8   $ 18,304       11   $ 173,485     $ 160,955     $ 12,530       8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

LIABILITIES AND STOCKHOLDERS’ EQUITY

                         

LIABILITIES

                         

Checking with interest

  $ 26,312     $ 24,612     $ 23,545     $ 23,422     $ 23,919     $ 1,700       7   $ 2,393       10   $ 25,462     $ 23,456     $ 2,006       9

Money market accounts

    45,187       39,839       38,809       37,161       35,228       5,348       13       9,959       28       42,513       35,218       7,295       21  

Regular savings

    15,883       14,201       13,582       13,442       13,324       1,682       12       2,559       19       15,042       12,977       2,065       16  

Term deposits

    16,470       18,616       19,788       20,951       22,292       (2,146     (12     (5,822     (26     17,543       21,713       (4,170     (19
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total interest-bearing deposits

    103,852       97,268       95,724       94,976       94,763       6,584       7       9,089       10       100,560       93,364       7,196       8  

Short-term borrowed funds

    222       644       504       600       863       (422     (66     (641     (74     433       781       (348     (45

FHLB advances

    2,595       5,138       3,259       2,478       3,155       (2,543     (49     (560     (18     3,866       4,418       (552     (12

Senior debt

    7,499       7,263       7,914       8,000       7,573       236       3       (74     (1     7,381       7,482       (101     (1

Subordinated debt and other debt

    1,661       1,656       1,657       1,656       1,658       5       —         3       —         1,659       1,655       4       —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total long-term borrowed funds

    11,755       14,057       12,830       12,134       12,386       (2,302     (16     (631     (5     12,906       13,555       (649     (5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total borrowed funds

    11,977       14,701       13,334       12,734       13,249       (2,724     (19     (1,272     (10     13,339       14,336       (997     (7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total interest-bearing liabilities

    115,829       111,969       109,058       107,710       108,012       3,860       3       7,817       7       113,899       107,700       6,199       6  

Total demand deposits

    37,745       29,362       29,928       28,945       28,389       8,383       29       9,356       33       33,553       28,426       5,127       18  

Other liabilities

    4,086       4,053       3,819       3,789       3,536       33       1       550       16       4,070       3,560       510       14  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

TOTAL LIABILITIES

    157,660       145,384       142,805       140,444       139,937       12,276       8       17,723       13       151,522       139,686       11,836       8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

STOCKHOLDERS’ EQUITY

    22,133       21,793       21,841       21,666       21,552       340       2       581       3       21,963       21,269       694       3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $ 179,793     $ 167,177     $ 164,646     $ 162,110     $ 161,489     $ 12,616       8   $ 18,304       11   $ 173,485     $ 160,955     $ 12,530       8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Memo: Total loans and leases, including loans held for sale

  $ 131,975     $ 123,744     $ 121,631     $ 119,361     $ 119,469     $ 8,231       7   $ 12,506       10   $ 127,860     $ 119,174     $ 8,686       7

Total deposits (interest-bearing and demand)

  $ 141,597     $ 126,630     $ 125,652     $ 123,921     $ 123,152     $ 14,967       12   $ 18,445       15   $ 134,113     $ 121,790     $ 12,323       10

Total average tangible common equity

  $ 13,706     $ 13,484     $ 13,660     $ 13,788     $ 13,670     $ 222       2   $ 36         $ 13,595     $ 13,453     $ 142       1

 

8


Table of Contents

AVERAGE ANNUALIZED YIELDS AND RATES

(in millions, except rates)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
    2Q20     1Q20     4Q19     3Q19     2Q19     2020     2019  
    Rate     Income/
Expense
    Rate     Income/
Expense
    Rate     Income/
Expense
    Rate     Income/
Expense
    Rate     Income/
Expense
    Rate     Income/
Expense
    Rate     Income/
Expense
 

INTEREST-EARNING ASSETS

                           

Interest-bearing cash and due from banks and deposits in banks

    0.09   $ 1       1.12   $ 5       1.49   $ 7       2.09   $ 8       2.16   $ 7       0.36   $ 6       2.18   $ 15  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Taxable investment securities

    2.15       130       2.32       147       2.47       159       2.38       153       2.56       164       2.24       277       2.60       330  

Non-taxable investment securities

    2.60       —         2.60       —         2.60       —         2.60             2.60             2.60       —         2.60       —    
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total investment securities

    2.15       130       2.32       147       2.47       159       2.38       153       2.56       164       2.24       277       2.60       330  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Investment securities and interest-bearing deposits

      131         152         166         161         171         283         345  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Commercial

    3.23       412       3.82       417       3.95       424       4.17       442       4.45       471       3.50       829       4.44       931  

Commercial real estate

    2.87       106       3.96       139       4.26       142       4.70       155       4.91       166       3.40       245       4.94       331  

Leases

    2.75       16       2.83       18       2.77       18       2.85       19       2.89       19       2.79       34       2.87       40  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total commercial loans and leases

    3.14       534       3.81       574       3.97       584       4.23       616       4.48       656       3.45       1,108       4.48       1,302  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Residential mortgages

    3.19       150       3.47       164       3.40       165       3.53       171       3.65       176       3.33       314       3.66       351  

Home equity

    3.50       111       4.69       152       4.73       159       5.24       178       5.28       180       4.10       263       5.27       363  

Automobile

    4.33       129       4.34       131       4.32       132       4.25       129       4.19       125       4.33       260       4.12       245  

Education

    5.21       145       5.64       149       5.76       143       5.89       141       5.97       137       5.42       294       5.98       271  

Other retail

    7.52       123       7.77       132       7.83       129       8.21       121       8.24       118       7.65       255       8.55       241  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total retail loans

    4.31       658       4.75       728       4.72       728       4.88       740       4.92       736       4.53       1,386       4.94       1,471  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total loans and leases

    3.69       1,192       4.29       1,302       4.36       1,312       4.56       1,356       4.71       1,392       3.98       2,494       4.72       2,773  

Loans held for sale, at fair value

    2.85       20       3.28       15       3.38       18       3.71       19       3.93       15       3.03       35       4.09       26  

Other loans held for sale

    4.66       7       4.31       9       3.89       5       6.42       2       5.67       2       4.45       16       6.41       6  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total interest-earning assets

    3.33       1,350       3.91       1,478       3.98       1,501       4.15       1,538       4.30       1,580       3.61       2,828       4.32       3,150  

INTEREST-BEARING LIABILITIES

                           

Checking with interest

    0.17       11       0.60       37       0.71       42       0.88       52       0.96       57       0.38       48       0.94       109  

Money market accounts

    0.35       39       0.94       93       1.12       110       1.24       116       1.30       114       0.63       132       1.28       224  

Regular savings

    0.39       15       0.51       18       0.52       17       0.59       20       0.62       21       0.44       33       0.59       38  

Term deposits

    1.44       59       1.70       79       1.88       94       2.05       109       2.09       116       1.58       138       2.08       224  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total interest-bearing deposits

    0.48       124       0.94       227       1.09       263       1.24       297       1.30       308       0.70       351       1.28       595  

Short-term borrowed funds

    0.29             0.76       1       1.07       2       1.43       2       1.81       4       0.64       1       1.61       6  

FHLB advances

    0.86       6       1.87       24       1.98       16       1.92       12       2.63       21       1.53       30       2.67       59  

Senior debt

    2.25       42       2.69       49       3.02       60       3.21       65       3.41       64       2.46       91       3.47       130  

Subordinated debt and other debt

    4.22       18       4.13       17       4.20       17       4.13       17       4.08       17       4.17       35       4.07       34  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total long-term borrowed funds

    2.22       66       2.56       90       2.91       93       3.07       94       3.30       102       2.40       156       3.28       223  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total borrowed funds

    2.18       66       2.48       91       2.84       95       3.00       96       3.20       106       2.35       157       3.19       229  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total interest-bearing liabilities

    0.66       190       1.14       318       1.30       358       1.45       393       1.54       414       0.90       508       1.54       824  

INTEREST RATE SPREAD

    2.67         2.77         2.68         2.70         2.77         2.71         2.78    
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INTEREST MARGIN AND NET INTEREST INCOME

    2.87   $ 1,160       3.09   $ 1,160       3.04   $ 1,143       3.10   $ 1,145       3.20   $ 1,166       2.98   $ 2,320       3.22   $ 2,326  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INTEREST MARGIN AND NET INTEREST INCOME, FTE1

    2.88   $ 1,163       3.10   $ 1,164       3.06   $ 1,147       3.12   $ 1,150       3.21   $ 1,172       2.99   $ 2,327       3.23   $ 2,338  

Memo: Total deposit costs

    0.35   $ 124       0.72   $ 227       0.83   $ 263       0.95   $ 297       1.00   $ 308       0.53   $ 351       0.98   $ 595  

 

1 

Net interest income and net interest margin is presented on a fully taxable-equivalent (“FTE”) basis using the federal statutory tax rate of 21%. The FTE impact is predominantly attributable to commercial loans for the periods presented.

 

9


Table of Contents

SEGMENT FINANCIAL HIGHLIGHTS - CONSUMER BANKING

(in millions, except ratio data)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  

CONSUMER BANKING

                                2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

Net interest income

  $ 814     $ 793     $ 796     $ 799     $ 799     $ 21       3   $ 15       2   $ 1,607     $ 1,587     $ 20       1

Noninterest income

    428       357       296       336       277       71       20       151       55       785       524       261       50  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total revenue

    1,242       1,150       1,092       1,135       1,076       92       8       166       15       2,392       2,111       281       13  

Noninterest expense

    735       738       718       718       715       (3     —         20       3       1,473       1,415       58       4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Profit before provision for credit losses

    507       412       374       417       361       95       23       146       40       919       696       223       32  

Provision for credit losses

    80       97       97       83       78       (17     (18     2       3       177       145       32       22  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income before income tax expense

    427       315       277       334       283       112       36       144       51       742       551       191       35  

Income tax expense

    107       79       68       83       70       28       35       37       53       186       136       50       37  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income

  $ 320     $ 236     $ 209     $ 251     $ 213     $ 84       36   $ 107       50   $ 556     $ 415     $ 141       34
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

AVERAGE BALANCES

                         

Total assets

  $ 71,634     $ 68,415     $ 68,069     $ 66,365     $ 65,485     $ 3,219       5   $ 6,149       9   $ 70,024     $ 65,247     $ 4,777       7

Total loans and leases1

    68,205       65,343       65,157       63,553       62,678       2,862       4       5,527       9       66,774       62,422       4,352       7  

Deposits

    91,648       85,228       85,477       85,595       85,660       6,420       8       5,988       7       88,438       84,123       4,315       5  

Interest-earning assets

    68,256       65,393       65,208       63,605       62,731       2,863       4       5,525       9       66,825       62,475       4,350       7  

KEY METRICS

                         

Net interest margin

    4.80     4.88     4.85     4.99     5.11     (8 ) bps        (31 ) bps        4.84     5.12     (28 ) bps   

Efficiency ratio

    59.19       64.16       65.74       63.28       66.43       (497 ) bps        (724 ) bps        61.58       67.01       (543 ) bps   

Loans-to-deposits ratio (period-end balances)

    69.17       72.94       74.15       73.61       71.13       (377 ) bps        (196 ) bps        69.17       71.13       (196 ) bps   

Loans-to-deposits ratio (average balances)

    71.59       74.07       73.37       72.11       71.57       (248 ) bps        2  bps        72.79       72.89       (10 ) bps   

Return on average total tangible assets

    1.80       1.39       1.22       1.50       1.31       41  bps        49  bps        1.60       1.29       31  bps   

 

1 

Includes loans held for sale.

 

10


Table of Contents

SEGMENT FINANCIAL HIGHLIGHTS - CONSUMER BANKING, CONTINUED

(in millions, except ratio data)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

MORTGAGE BANKING FEES

                         

Production revenue

  $ 271     $ 136     $ 61     $ 80     $ 49     $ 135       99   $ 222       NM     $ 407     $ 80     $ 327       NM  

Mortgage servicing revenue

    9       17       16       12       9       (8     (47     —         —         26       23       3       13  

MSR valuation changes, net of hedge impact

    (4     6       4       25       4       (10     NM       (8     NM       2       2       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total mortgage banking fees

  $ 276     $ 159     $ 81     $ 117     $ 62     $ 117       74   $ 214       NM     $ 435     $ 105     $ 330       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Gain on sale of secondary originations

    3.09     2.36     0.98     1.40     1.13     73  bps        196  bps        2.80     1.18     162  bps   

RESIDENTIAL REAL ESTATE ORIGINATIONS

                         

Retail

  $ 3,882     $ 2,523     $ 3,196     $ 2,771     $ 2,115     $ 1,359       54   $ 1,767       84   $ 6,405     $ 3,428     $ 2,977       87

Third Party

    7,388       4,813       5,750       5,080       3,921       2,575       54       3,467       88       12,201       6,181       6,020       97  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total

  $ 11,270     $ 7,336     $ 8,946     $ 7,851     $ 6,036     $ 3,934       54   $ 5,234       87   $ 18,606     $ 9,609     $ 8,997       94
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Originated for sale

    81     83     80     80     81     (200 ) bps        — bps         82     81     100  bps   

Originated for investment

    19       17       20       20       19       200  bps        — bps         18       19       (100 ) bps   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

 

 

   

 

 

     

Total

    100     100     100     100     100             100     100    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

           

 

 

   

 

 

     

MORTGAGE SERVICING INFORMATION (UPB)

                         

Loans serviced for others

  $ 79,942     $ 79,157     $ 77,526     $ 74,610     $ 72,518     $ 785       1   $ 7,424       10   $ 79,942     $ 72,518     $ 7,424       10

Owned loans serviced

    21,642       21,057       20,831       19,969       19,258       585       3       2,384       12       21,642       19,258       2,384       12  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total

  $ 101,584     $ 100,214     $ 98,357     $ 94,579     $ 91,776     $ 1,370       1   $ 9,808       11   $ 101,584     $ 91,776     $ 9,808       11
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

MSR CARRYING VALUE1

                         

MSR at fair value

  $ 568     $ 577     $ 642     $ 510     $ 531     ($ 9     (2 %)    $ 37       7   $ 568     $ 531     $ 37       7

MSR at lower of cost or market

    —         —         182       177       189       —               (189     (100     —         189       (189     (100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total

  $ 568     $ 577     $ 824     $ 687     $ 720     ($ 9     (2 %)    ($ 152     (21 %)    $ 568     $ 720     ($ 152     (21 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

1 

Beginning in the first quarter of 2020, mortgage servicing rights previously accounted for at lower of cost or market are now accounted for at fair value.

 

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SEGMENT FINANCIAL HIGHLIGHTS - COMMERCIAL BANKING

(in millions, except ratio data)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  

COMMERCIAL BANKING

                                2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

Net interest income

  $ 419     $ 365     $ 363     $ 360     $ 371     $ 54       15   $ 48       13   $ 784     $ 743     $ 41       6

Noninterest income

    144       125       175       133       149       19       15       (5     (3     269       299       (30     (10
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total revenue

    563       490       538       493       520       73       15       43       8       1,053       1,042       11       1  

Noninterest expense

    213       221       219       213       217       (8     (4     (4     (2     434       426       8       2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Profit before provision for credit losses

    350       269       319       280       303       81       30       47       16       619       616       3       —    

Provision for credit losses

    70       43       24       27       25       27       63       45       180       113       46       67       146  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income before income tax expense

    280       226       295       253       278       54       24       2       1       506       570       (64     (11

Income tax expense

    59       47       64       57       62       12       26       (3     (5     106       127       (21     (17
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income

  $ 221     $ 179     $ 231     $ 196     $ 216     $ 42       23   $ 5       2   $ 400     $ 443     ($ 43     (10 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

AVERAGE BALANCES

                         

Total assets

  $ 65,280     $ 59,005     $ 56,407     $ 55,614     $ 56,135     $ 6,275       11   $ 9,145       16   $ 62,142     $ 55,884     $ 6,258       11

Total loans and leases1

    62,011       56,555       54,523       53,814       54,653       5,456       10       7,358       13       59,283       54,545       4,738       9  

Deposits

    41,750       33,545       32,715       31,491       30,273       8,205       24       11,477       38       37,647       30,050       7,597       25  

Interest-earning assets

    62,422       57,016       54,905       54,087       54,950       5,406       9       7,472       14       59,719       54,838       4,881       9  

KEY METRICS

                         

Net interest margin

    2.70     2.57     2.62     2.64     2.71     13  bps        (1 ) bps        2.64     2.73     (9 ) bps   

Efficiency ratio

    37.93       45.06       40.60       43.35       41.58       (713 ) bps        (365 ) bps        41.25       40.84       41  bps   

Loans-to-deposits ratio (period-end balances)

    140.79       164.10       165.24       163.62       173.48       (2,331 ) bps        (3,269 ) bps        140.79       173.48       (3,269 ) bps   

Loans-to-deposits ratio (average balances)

    147.03       167.18       165.80       170.01       179.49       (2,015 ) bps        (3,246 ) bps        156.00       180.35       (2,435 ) bps   

Return on average total tangible assets

    1.36       1.22       1.63       1.40       1.54       14  bps        (18 ) bps        1.29       1.60       (31 ) bps   

 

1 

Includes loans held for sale.

 

12


Table of Contents

SEGMENT FINANCIAL HIGHLIGHTS - OTHER

(in millions)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
OTHER1                                 2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $     %     $     %                 $     %  

Net interest income

  ($ 73   $ 2     ($ 16   ($ 14   ($ 4   ($ 75     NM     ($ 69     NM     ($ 71   ($ 4   ($ 67     NM  

Noninterest income

    18       15       23       24       36       3       20       (18     (50     33       67       (34     (51
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total revenue

    (55     17       7       10       32       (72     NM       (87     NM       (38     63       (101     NM  

Noninterest expense

    31       53       49       42       19       (22     (42     12       63       84       47       37       79  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

(Loss) profit before provision for credit losses

    (86     (36     (42     (32     13       (50     (139     (99     NM       (122     16       (138     NM  

Provision for credit losses

    314       460       (11     (9     (6     (146     (32     320       NM       774       (9     783       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

(Loss) income before income tax benefit

    (400     (496     (31     (23     19       96       19       (419     NM       (896     25       (921     NM  

Income tax benefit

    (112     (115     (41     (25     (5     3       3       (107     NM       (227     (9     (218     NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net (loss) income

  ($ 288   ($ 381   $ 10     $ 2     $ 24     $ 93       24   ($ 312     NM     ($ 669   $ 34     ($ 703     NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

AVERAGE BALANCES

                         

Total assets

  $ 42,879     $ 39,757     $ 40,170     $ 40,131     $ 39,869     $ 3,122       8   $ 3,010       8   $ 41,319     $ 39,824     $ 1,495       4

Total loans and leases2

    1,759       1,846       1,951       1,994       2,138       (87     (5     (379     (18     1,803       2,207       (404     (18

Deposits

    8,199       7,857       7,460       6,835       7,219       342       4       980       14       8,028       7,617       411       5  

Interest-earning assets

    31,712       28,537       28,798       28,783       28,642       3,175       11       3,070       11       30,124       28,607       1,517       5  

 

1 

Includes the financial impact of non-core, liquidating loan portfolios and other non-core assets, our treasury activities, wholesale funding activities, securities portfolio, community development assets and other unallocated assets, liabilities, capital, revenues, provision for credit losses, expenses and income tax expense, not attributed to our Consumer Banking or Commercial Banking segments.

2 

Includes loans held for sale.

 

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CREDIT-RELATED INFORMATION

(in millions, except ratio data)

 

    AS OF     JUNE 30, 2020 CHANGE  
    Jun 30, 2020     Mar 31, 2020     Dec 31, 2019     Sept 30, 2019     Jun 30, 2019     Mar 31, 2020     June 30, 2019  
                                  $/bps     %     $/bps     %  

NONACCRUAL LOANS AND LEASES1

                 

Commercial

  $ 366     $ 305     $ 240     $ 228     $ 198     $ 61       20   $ 168       85

Commercial real estate

    61       8       2       49       4       53       NM       57       NM  

Leases

    79       1       3       4       17       78       NM       62       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total commercial loans and leases

    506       314       245       281       219       192       61       287       131  

Residential mortgages2

    112       101       93       91       98       11       11       14       14  

Home equity

    254       242       246       247       278       12       5       (24     (9

Automobile

    67       69       67       69       62       (2     (3     5       8  

Education

    18       21       18       17       40       (3     (14     (22     (55

Other retail

    33       33       34       32       30                   3       10  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total retail loans

    484       466       458       456       508       18       4       (24     (5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Nonaccrual loans and leases

    990       780       703       737       727       210       27       263       36  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Repossessed assets

    33       44       45       40       32       (11     (25     1       3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Nonaccrual loans and leases and repossessed assets

  $ 1,023     $ 824     $ 748     $ 777     $ 759     $ 199       24   $ 264       35
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

NONACCRUAL LOANS AND LEASES BY PRODUCT3

                 

Commercial

  $ 506     $ 314     $ 245     $ 281     $ 219     $ 192       61   $ 287       131

Retail

    517       510       503       496       540       7       1       (23     (4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total nonaccrual loans and leases

  $ 1,023     $ 824     $ 748     $ 777     $ 759     $ 199       24   $ 264       35
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

ASSET QUALITY RATIOS

                 

Allowance for credit losses to loans and leases

    2.01     1.73     1.09     1.11     1.13     28 bps         88 bps    

Allowance for credit losses to nonaccrual loans and leases

    255.39       283.48       184.31       177.42       181.54       NM         NM    

Nonaccrual loans and leases to loans and leases

    0.79       0.61       0.59       0.63       0.62       18         17    

 

1 

Beginning in the first quarter of 2020 and upon the adoption of ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, nonperforming loans and leases are now referred to as nonaccrual loans and leases and other nonperforming assets are referred to as repossessed assets.

2 

Beginning in the fourth quarter of 2019, nonaccrual balances exclude both fully and partially guaranteed residential mortgage loans sold to Ginnie Mae for which the Company has the right, but not the obligation, to repurchase. Prior periods have been adjusted to exclude partially guaranteed amounts to conform with the current period presentation.

3 

Nonaccrual loans and leases by product includes repossessed assets.

 

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Table of Contents

CREDIT-RELATED INFORMATION, CONTINUED

(in millions, except ratio data)

 

 

    AS OF     JUNE 30, 2020 CHANGE  
    Jun 30, 2020     Mar 31, 2020     Dec 31, 2019     Sept 30, 2019     Jun 30, 2019     Mar 31, 2020     June 30, 2019  
                                  $/bps     %     $/bps     %  

LOANS AND LEASES 90 DAYS OR MORE PAST DUE AND ACCRUING

                 

Commercial

  $ 33     $ —       $ 2     $ 1     $ 4     $ 33       100   $ 29       NM  

Commercial real estate

    —         —         —         —         —         —         —         —         —    

Leases

    —         —         —         1       1       —         —         (1     (100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total commercial loans and leases

    33       —         2       2       5       33       100       28       NM  

Residential mortgages

    13       14       13       15       14       (1     (7     (1     (7

Home equity

    —         —         —         —         —         —         —         —         —    

Automobile

    —         —         —         —         —         —         —         —         —    

Education

    2       2       2       3       3       —         —         (1     (33

Other retail

    7       11       8       10       9       (4     (36     (2     (22
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total retail loans

    22       27       23       28       26       (5     (19     (4     (15
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

Total loans and leases

    55       27       25       30       31       28       104       24       77  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

   

 

15


Table of Contents

CREDIT-RELATED INFORMATION, CONTINUED

(in millions)

 

     QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                     2Q20 Change                 2020 Change  
     2Q20     1Q20     4Q19      3Q19     2Q19      1Q20     2Q19     2020     2019     2019  
                                     $     %     $     %                 $     %  

CHARGE-OFFS, RECOVERIES AND RELATED RATIOS

                            

GROSS CHARGE-OFFS

                            

Commercial

   $ 68     $ 47     $ 24      $ 20     $ 40      $ 21       45   $ 28       70   $ 115     $ 43     $ 72       167

Commercial real estate

     —         —         9        10       —          —         —         —         —         —         20       (20     (100

Leases

     6       —         1        5       5        6       100       1       20       6       8       (2     (25
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total commercial loans and leases

     74       47       34        35       45        27       57       29       64       121       71       50       70  

Residential mortgages

     2       1       2        2       2        1       100       —         —         3       4       (1     (25

Home equity

     6       8       10        11       11        (2     (25     (5     (45     14       18       (4     (22

Automobile

     31       39       38        37       30        (8     (21     1       3       70       68       2       3  

Education

     14       18       20        18       18        (4     (22     (4     (22     32       34       (2     (6

Other retail

     53       61       58        56       50        (8     (13     3       6       114       99       15       15  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total retail loans

     106       127       128        124       111        (21     (17     (5     (5     233       223       10       4  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total gross charge-offs

   $ 180     $ 174     $ 162      $ 159     $ 156      $ 6       3   $ 24       15   $ 354     $ 294     $ 60       20
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

GROSS RECOVERIES

                            

Commercial

   $ 3     $ 3     $ 7      $ 3     $ 12      $ —         —     ($ 9     (75 %)    $ 6     $ 14     ($ 8     (57 %) 

Commercial real estate

     —         —         —          —         —          —         —         —         —         —         —         —         —    

Leases

     —         —         —          —         —          —         —         —         —         —         —         —         —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total commercial loans and leases

     3       3       7        3       12        —         —         (9     (75     6       14       (8     (57

Residential mortgages

     1       1       1        1       2        —         —         (1     (50     2       7       (5     (71

Home equity

     8       11       10        12       10        (3     (27     (2     (20     19       27       (8     (30

Automobile

     11       12       11        15       16        (1     (8     (5     (31     23       31       (8     (26

Education

     4       4       4        4       4        —         —         —         —         8       8       —         —    

Other retail

     6       6       7        11       6        —         —         —         —         12       12       —         —    
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total retail loans

     30       34       33        43       38        (4     (12     (8     (21     64       85       (21     (25
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total gross recoveries

   $ 33     $ 37     $ 40      $ 46     $ 50      ($ 4     (11 %)    ($ 17     (34 %)    $ 70     $ 99     ($ 29     (29 %) 
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

NET CHARGE-OFFS (RECOVERIES)

                            

Commercial

   $ 65     $ 44     $ 17      $ 17     $ 28      $ 21       48   $ 37       132   $ 109     $ 29     $ 80       NM  

Commercial real estate

     —         —         9        10       —          —         —         —         —         —         20       (20     (100

Leases

     6       —         1        5       5        6       100       1       20       6       8       (2     (25
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total commercial loans and leases

     71       44       27        32       33        27       61       38       115       115       57       58       102  

Residential mortgages

     1       —         1        1       —          1       100       1       100       1       (3     4       NM  

Home equity

     (2     (3     —          (1     1        1       33       (3     NM       (5     (9     4       44  

Automobile

     20       27       27        22       14        (7     (26     6       43       47       37       10       27  

Education

     10       14       16        14       14        (4     (29     (4     (29     24       26       (2     (8

Other retail

     47       55       51        45       44        (8     (15     3       7       102       87       15       17  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total retail loans

     76       93       95        81       73        (17     (18     3       4       169       138       31       22  
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total net charge-offs

   $ 147     $ 137     $ 122      $ 113     $ 106      $ 10       7   $ 41       39   $ 284     $ 195     $ 89       46
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

    

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

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CREDIT-RELATED INFORMATION, CONTINUED

(in millions, except rates)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $/bps     %     $/bps     %                 $/bps     %  

ANNUALIZED NET CHARGE-OFF (RECOVERY) RATES

                         

Commercial

    0.52     0.41     0.16     0.16     0.27     11 bps         25 bps         0.47%       0.14%       33 bps    

Commercial real estate

    —         —         0.26       0.31       —         —   bps         —   bps         —         0.30       (30) bps    

Leases

    1.03       0.07       0.19       0.80       0.72       96 bps         31 bps         0.55       0.56       (1) bps    

Total commercial loans and leases

    0.42       0.30       0.19       0.22       0.23       12 bps         19 bps         0.37       0.20       17 bps    

Residential mortgages

    0.02       0.01       0.02       0.01       0.01       1 bps         1 bps         0.01       (0.03)       4 bps    

Home equity

    (0.05     (0.10     0.02       (0.04     0.01       5 bps         (6) bps         (0.08)       (0.13)       5 bps    

Automobile

    0.68       0.88       0.85       0.74       0.49       (20) bps         19 bps         0.78       0.62       16 bps    

Education

    0.34       0.55       0.65       0.58       0.62       (21) bps         (28) bps         0.44       0.57       (13) bps    

Other retail

    2.93       3.21       3.09       3.08       3.11       (28) bps         (18) bps         3.07       3.09       (2) bps    

Total retail loans

    0.50       0.61       0.61       0.53       0.49       (11) bps         1 bps         0.56       0.47       9 bps    

Total loans and leases

    0.46     0.46     0.41     0.38     0.36     —   bps         10 bps         0.46%       0.33%       13 bps    

Memo: Average loans

                         

Commercial

  $ 50,443     $ 43,152     $ 42,012     $ 41,476     $ 41,755     $ 7,291       17   $ 8,688       21   $ 46,797     $ 41,659     $ 5,138       12

Commercial real estate

    14,540       13,876       13,103       12,892       13,379       664       5       1,161       9       14,208       13,325       883       7  

Leases

    2,426       2,482       2,546       2,615       2,745       (56     (2     (319     (12     2,454       2,809       (355     (13
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total commercial loans and leases

    67,409       59,510       57,661       56,983       57,879       7,899       13       9,530       16       63,459       57,793       5,666       10  

Residential mortgages

    18,872       18,866       19,495       19,405       19,232       6       —         (360     (2     18,869       19,163       (294     (2

Home equity

    12,736       13,042       13,265       13,501       13,754       (306     (2     (1,018     (7     12,889       13,913       (1,024     (7

Automobile

    11,998       12,173       12,099       12,036       11,984       (175     (1     14       —         12,085       12,026       59       —    

Education

    11,183       10,610       9,888       9,459       9,235       573       5       1,948       21       10,897       9,153       1,744       19  

Other retail

    6,557       6,854       6,497       5,873       5,699       (297     (4     858       15       6,706       5,668       1,038       18  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total retail loans

    61,346       61,545       61,244       60,274       59,904       (199     —         1,442       2       61,446       59,923       1,523       3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total loans and leases

  $ 128,755     $ 121,055     $ 118,905     $ 117,257     $ 117,783     $ 7,700       6   $ 10,972       9   $ 124,905     $ 117,716     $ 7,189       6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

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CREDIT-RELATED INFORMATION, CONTINUED

(in millions)

 

    QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  2Q20 Change                 2020 Change  
    2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                  $     %     $     %                 $     %  

SUMMARY OF CHANGES IN THE COMPONENTS OF THE ALLOWANCE FOR CREDIT LOSSES

                         

Allowance for loan and lease losses - beginning

  $ 2,171     $ 1,252     $ 1,263     $ 1,227     $ 1,245     $ 919       73   $ 926       74   $ 1,252     $ 1,242     $ 10       1

Cumulative effect of change in accounting principle:

                         

Commercial

    —         (176     —         —         —         176       100       —         —         (176     —         (176     (100

Retail

    —         629       —         —         —         (629     (100     —         —         629       —         629       100  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total cumulative effect of change in accounting principle

    —         453       —         —         —         (453     (100     —         —         453       —         453       100  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Allowance for loan and lease losses - beginning, adjusted

    2,171       1,705       1,263       1,227       1,245       466       27       926       74       1,705       1,242       463       37  

Charge-offs:

                         

Commercial

    74       47       34       35       45       27       57       29       64       121       71       50       70  

Retail

    106       127       128       124       111       (21     (17     (5     (5     233       223       10       4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total charge-offs

    180       174       162       159       156       6       3       24       15       354       294       60       20  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

           

Recoveries:

                         

Commercial

    3       3       7       3       12       —         —         (9     (75     6       14       (8     (57

Retail

    30       34       33       43       38       (4     (12     (8     (21     64       85       (21     (25
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total recoveries

    33       37       40       46       50       (4     (11     (17     (34     70       99       (29     (29
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net charge-offs

    147       137       122       113       106       10       7       41       39       284       195       89       46  

Provision for loan and lease losses:

                         

Commercial

    554       298       (11     64       22       256       86       532       NM       852       47       805       NM  

Retail

    (130     305       122       85       66       (435     NM       (196     NM       175       133       42       32  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total provision for loan and lease losses

    424       603       111       149       88       (179     (30     336       NM       1,027       180       847       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Allowance for loan and lease losses - ending

  $ 2,448     $ 2,171     $ 1,252     $ 1,263     $ 1,227     $ 277       13   $ 1,221       100   $ 2,448     $ 1,227     $ 1,221       100
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Reserve for unfunded lending commitments - beginning

  $ 39     $ 44     $ 45     $ 93     $ 84     ($ 5     (11 %)    ($ 45     (54 %)    $ 44     $ 91     ($ 47     (52 %) 

Cumulative effect of change in accounting principle

    —         (2     —         —         —         2       100       —         —         (2     —         (2     —    

Provision for unfunded lending commitments

    40       (3     (1     (48     9       43       NM       31       NM       37       2       35       NM  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Reserve for unfunded lending commitments - ending

  $ 79     $ 39     $ 44     $ 45     $ 93     $ 40       103   ($ 14     (15 %)    $ 79     $ 93     ($ 14     (15 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total allowance for credit losses - ending

  $ 2,527     $ 2,210     $ 1,296     $ 1,308     $ 1,320     $ 317       14   $ 1,207       91   $ 2,527     $ 1,320     $ 1,207       91
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Memo: Total allowance for credit losses by product

                         

Commercial

  $ 1,304     $ 790     $ 718     $ 757     $ 773     $ 514       65   $ 531       69   $ 1,304     $ 773     $ 531       69

Retail

    1,223       1,420       578       551       547       (197     (14     676       124       1,223       547       676       124  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total allowance for credit losses

  $ 2,527     $ 2,210     $ 1,296     $ 1,308     $ 1,320     $ 317       14   $ 1,207       91   $ 2,527     $ 1,320     $ 1,207       91
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

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Table of Contents

CAPITAL AND RATIOS

(in millions, except ratio data)

 

    AS OF     FOR THE SIX MONTHS ENDED JUNE 30,  
                                  JUNE 30, 2020 CHANGE                 2020 Change  
    Jun 30, 2020     Mar 31, 2020     Dec 31, 2019     Sept 30, 2019     Jun 30, 2019     Mar 31, 2020     June 30, 2019     2020     2019     2019  
                                  $     %     $     %                 $     %  

CAPITAL RATIOS AND COMPONENTS (PRELIMINARY)

                         

CET1 capital

  $ 14,154     $ 14,007     $ 14,304     $ 14,416     $ 14,629     $ 147       1   ($ 475     (3 %)         

Tier 1 capital

    16,119       15,577       15,874       15,549       15,762       542       3       357       2          

Total capital

    19,319       18,592       18,542       18,237       18,582       727       4       737       4          

Risk-weighted assets

    147,260       148,946       142,915       140,136       138,879       (1,686     (1     8,381       6          

Adjusted average assets1

    174,017       161,715       158,782       156,355       155,956       12,302       8       18,061       12          

CET1 capital ratio

    9.6     9.4     10.0     10.3     10.5                

Tier 1 capital ratio

    10.9       10.5       11.1       11.1       11.3                  

Total capital ratio

    13.1       12.5       13.0       13.0       13.4                  

Tier 1 leverage ratio

    9.3       9.6       10.0       9.9       10.1                  

TANGIBLE COMMON EQUITY (PERIOD-END)

                         

Common stockholders’ equity

  $ 20,453     $ 20,380     $ 20,631     $ 20,718     $ 20,884     $ 73       —     ($ 431     (2 %)    $ 20,453     $ 20,884     ($ 431     (2 %) 

Less: Goodwill

    7,050       7,050       7,044       7,044       7,040       —         —         10       —         7,050       7,040       10       —    

Less: Other intangible assets

    63       66       68       71       74       (3     (5     (11     (15     63       74       (11     (15

Add: Deferred tax liabilities2

    376       375       374       373       371       1       —         5       1       376       371       5       1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total tangible common equity

  $ 13,716     $ 13,639     $ 13,893     $ 13,976     $ 14,141     $ 77       1   ($ 425     (3 %)    $ 13,716     $ 14,141     ($ 425     (3 %) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

TANGIBLE COMMON EQUITY (AVERAGE)

                         

Common stockholders’ equity

  $ 20,446     $ 20,223     $ 20,400     $ 20,533     $ 20,420     $ 223       1   $ 26       —     $ 20,335     $ 20,182     $ 153       1

Less: Goodwill

    7,050       7,046       7,044       7,044       7,040       4       —         10       —         7,048       7,029       19       —    

Less: Other intangible assets

    65       67       69       73       80       (2     (3     (15     (19     66       69       (3     (4

Add: Deferred tax liabilities2

    375       374       373       372       370       1       —         5       1       374       369       5       1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total tangible common equity

  $ 13,706     $ 13,484     $ 13,660     $ 13,788     $ 13,670     $ 222       2   $ 36       —     $ 13,595     $ 13,453     $ 142       1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

INTANGIBLE ASSETS (PERIOD-END)

                         

Goodwill

  $ 7,050     $ 7,050     $ 7,044     $ 7,044     $ 7,040     $ —         —     $ 10       —     $ 7,050     $ 7,040     $ 10       —  

Other intangible assets

    63       66       68       71       74       (3     (5     (11     (15     63       74       (11     (15
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total intangible assets

  $ 7,113     $ 7,116     $ 7,112     $ 7,115     $ 7,114     ($ 3     —     ($ 1     —     $ 7,113     $ 7,114     ($ 1     —  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

1 

Adjusted average assets include quarterly average assets, less deductions for disallowed goodwill and other intangible assets, net of deferred tax liabilities related to tax deductible goodwill, and the accumulated other comprehensive income impact related to the adoption of post-retirement benefit plan guidance under GAAP.

2 

Deferred tax liabilities relate to tax-deductible goodwill, which is netted against goodwill when calculating tangible common equity.

 

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Table of Contents

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS

(in millions, except share, per-share and ratio data)

Non-GAAP Financial Measures

This document contains non-GAAP financial measures denoted as Underlying results. Underlying results for any given reporting period exclude certain items that may occur in that period which Management does not consider indicative of the Company’s on-going financial performance. We believe these non-GAAP financial measures provide useful information to investors because they are used by our Management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our Underlying results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of Underlying results increases comparability of period-to-period results. The following tables present reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measures.

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 such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.

 

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Table of Contents

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS, CONTINUED

(in millions, except share, per-share and ratio data)

 

            QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                          2Q20 Change                 2020 Change  
            2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                          $     %     $     %                 $     %  

Total revenue, Underlying:

                             

Total revenue (GAAP)

     A      $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       6   $ 122       7   $ 3,407     $ 3,216     $ 191       6

Less: Notable items

        —         —         —         —         —         —         —         —         —         —         —         —         —    
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Total revenue, Underlying (non-GAAP)

     B      $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       6   $ 122       7   $ 3,407     $ 3,216     $ 191       6
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Noninterest expense, Underlying:

                             

Noninterest expense (GAAP)

     C      $ 979     $ 1,012     $ 986     $ 973     $ 951     ($ 33     (3 %)    $ 28       3   $ 1,991     $ 1,888     $ 103       5

Less: Notable items

        19       33       37       19       7       (14     (42     12       171       52       12       40       NM  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Noninterest expense, Underlying (non-GAAP)

     D      $ 960     $ 979     $ 949     $ 954     $ 944     ($ 19     (2 %)    $ 16       2   $ 1,939     $ 1,876     $ 63       3
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Pre-provision profit:

                             

Total revenue (GAAP)

     A      $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       6   $ 122       7   $ 3,407     $ 3,216     $ 191       6

Less: Noninterest expense (GAAP)

     C        979       1,012       986       973       951       (33     (3     28       3       1,991       1,888       103       5  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Pre-provision profit (GAAP)

      $ 771     $ 645     $ 651     $ 665     $ 677     $ 126       20   $ 94       14   $ 1,416     $ 1,328     $ 88       7
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Pre-provision profit, Underlying:

                             

Total revenue, Underlying (non-GAAP)

     B      $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       6   $ 122       7   $ 3,407     $ 3,216     $ 191       6

Less: Noninterest expense, Underlying (non-GAAP)

     D        960       979       949       954       944       (19     (2     16       2       1,939       1,876       63       3  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Pre-provision profit, Underlying (non-GAAP)

      $ 790     $ 678     $ 688     $ 684     $ 684     $ 112       17   $ 106       15   $ 1,468     $ 1,340     $ 128       10
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income before income tax expense, Underlying:

                             

Income before income tax expense (GAAP)

     E      $ 307     $ 45     $ 541     $ 564     $ 580     $ 262       NM     ($ 273     (47 %)    $ 352     $ 1,146     ($ 794     (69 %) 

Less: Expense before income tax benefit related to notable items

        (19     (33     (37     (19     (7     14       42       (12     (171     (52     (12     (40     NM  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income before income tax expense, Underlying (non-GAAP)

     F      $ 326     $ 78     $ 578     $ 583     $ 587     $ 248       NM     ($ 261     (44 %)    $ 404     $ 1,158     ($ 754     (65 %) 
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income tax expense, Underlying:

                             

Income tax expense (GAAP)

     G      $ 54     $ 11     $ 91     $ 115     $ 127     $ 43       NM     ($ 73     (57 %)    $ 65     $ 254     ($ 189     (74 %) 

Less: Income tax benefit related to notable items

        (9     (8     (33     (15     (2     (1     (13     (7     NM       (17     (3     (14     NM  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Income tax expense, Underlying (non-GAAP)

     H      $ 63     $ 19     $ 124     $ 130     $ 129     $ 44       232   ($ 66     (51 %)    $ 82     $ 257     ($ 175     (68 %) 
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income, Underlying:

                             

Net income (GAAP)

     I      $ 253     $ 34     $ 450     $ 449     $ 453     $ 219       NM     ($ 200     (44 %)    $ 287     $ 892     ($ 605     (68 %) 

Add: Notable items, net of income tax benefit

        10       25       4       4       5       (15     (60     5       100       35       9       26       NM  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income, Underlying (non-GAAP)

     J      $ 263     $ 59     $ 454     $ 453     $ 458     $ 204       NM     ($ 195     (43 %)    $ 322     $ 901     ($ 579     (64 %) 
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income available to common stockholders, Underlying:

                             

Net income available to common stockholders (GAAP)

     K      $ 225     $ 12     $ 427     $ 432     $ 435     $ 213       NM     ($ 210     (48 %)    $ 237     $ 859     ($ 622     (72 %) 

Add: Notable items, net of income tax benefit

        10       25       4       4       5       (15     (60     5       100       35       9       26       NM  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Net income available to common stockholders, Underlying (non-GAAP)

     L      $ 235     $ 37     $ 431     $ 436     $ 440     $ 198       NM     ($ 205     (47 %)    $ 272     $ 868     ($ 596     (69 %) 
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

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Table of Contents

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS, CONTINUED

(in millions, except share, per-share and ratio data)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED
JUNE 30,
 
                                      2Q20 Change                 2020 Change  
        2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                      $/bps     %     $/bps     %                 $/bps     %  

Operating leverage:

                           

Total revenue (GAAP)

  A   $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       5.55   $ 122       7.49   $ 3,407     $ 3,216     $ 191       5.94

Less: Noninterest expense (GAAP)

  C     979       1,012       986       973       951       (33     (3.41     28       2.89       1,991       1,888       103       5.46  
               

 

 

     

 

 

         

 

 

 

Operating leverage

                  8.96       4.60           0.48
               

 

 

     

 

 

         

 

 

 

Operating leverage, Underlying:

                           

Total revenue, Underlying (non-GAAP)

  B   $ 1,750     $ 1,657     $ 1,637     $ 1,638     $ 1,628     $ 93       5.55   $ 122       7.49   $ 3,407     $ 3,216     $ 191       5.94

Less: Noninterest expense, Underlying (non-GAAP)

  D     960       979       949       954       944       (19     (2.01     16       1.62       1,939       1,876       63       3.34  
               

 

 

     

 

 

         

 

 

 

Operating leverage, Underlying (non-GAAP)

                  7.56       5.87           2.60
               

 

 

     

 

 

         

 

 

 

Efficiency ratio and efficiency ratio, Underlying:

                           

Efficiency ratio

  C/A     55.91     61.10     60.28     59.40     58.41     (519) bps         (250) bps         58.43     58.70     (27) bps    

Efficiency ratio, Underlying (non-GAAP)

  D/B     54.85       59.08       58.02       58.22       58.02       (423) bps         (317) bps         56.91       58.34       (143) bps    

Effective income tax rate and effective income tax rate, Underlying:

                           

Effective income tax rate

  G/E     17.69     24.13     16.76     20.46     21.86     (644) bps         (417) bps         18.51     22.14     (363) bps    

Effective income tax rate, Underlying (non-GAAP)

  H/F     19.36       24.52       21.52       22.29       21.89       (516) bps         (253) bps         20.36       22.16       (180) bps    

Return on average common equity and return on average common equity, Underlying:

                           

Average common equity (GAAP)

  M   $ 20,446     $ 20,223     $ 20,400     $ 20,533     $ 20,420     $ 223       1   $ 26       —     $ 20,335     $ 20,182     $ 153       1

Return on average common equity

  K/M     4.44     0.24     8.30     8.35     8.54     420 bps         (410) bps         2.35     8.58     (623) bps    

Return on average common equity, Underlying (non-GAAP)

  L/M     4.63       0.74       8.36       8.45       8.63       389 bps         (400) bps         2.69       8.67       (598) bps    

Return on average tangible common equity and return on average tangible common equity, Underlying:

                           

Average common equity (GAAP)

  M   $ 20,446     $ 20,223     $ 20,400     $ 20,533     $ 20,420     $ 223       1   $ 26       —     $ 20,335     $ 20,182     $ 153       1

Less: Average goodwill (GAAP)

      7,050       7,046       7,044       7,044       7,040       4       —         10       —         7,048       7,029       19       —    

Less: Average other intangibles (GAAP)

      65       67       69       73       80       (2     (3     (15     (19     66       69       (3     (4

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

      375       374       373       372       370       1       —         5       1       374       369       5       1  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Average tangible common equity

  N   $ 13,706     $ 13,484     $ 13,660     $ 13,788     $ 13,670     $ 222       2   $ 36       —     $ 13,595     $ 13,453     $ 142       1
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Return on average tangible common equity

  K/N     6.62     0.36     12.39     12.44     12.75     626 bps         (613) bps         3.51     12.87     (936) bps    

Return on average tangible common equity, Underlying (non- GAAP)

  L/N     6.90       1.10       12.49       12.58       12.89       580 bps         (599) bps         4.03       13.00       (897) bps    

Return on average total assets and return on average total assets, Underlying:

                           

Average total assets (GAAP)

  O   $ 179,793     $ 167,177     $ 164,646     $ 162,110     $ 161,489     $ 12,616       8   $ 18,304       11   $ 173,485     $ 160,955     $ 12,530       8

Return on average total assets

  I/O     0.57     0.08     1.08     1.10     1.13     49 bps         (56) bps         0.33     1.12     (79) bps    

Return on average total assets, Underlying (non-GAAP)

  J/O     0.59       0.14       1.09       1.11       1.14       45 bps         (55) bps         0.37       1.13       (76) bps    

 

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NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS, CONTINUED

(in millions, except share, per-share and ratio data)

 

        QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED
JUNE 30,
 
                                      2Q20 Change                 2020 Change  
        2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                      $/bps     %     $/bps     %                 $/bps     %  

Return on average total tangible assets and return on average total tangible assets, Underlying:

                           

Average total assets (GAAP)

  P   $ 179,793     $ 167,177     $ 164,646     $ 162,110     $ 161,489     $ 12,616       8   $ 18,304       11   $ 173,485     $ 160,955     $ 12,530       8

Less: Average goodwill (GAAP)

      7,050       7,046       7,044       7,044       7,040       4       —         10       —         7,048       7,029       19       —    

Less: Average other intangibles (GAAP)

      65       67       69       73       80       (2     (3     (15     (19     66       69       (3     (4

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

      375       374       373       372       370       1       —         5       1       374       369       5       1  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Average tangible assets

  Q   $ 173,053     $ 160,438     $ 157,906     $ 155,365     $ 154,739     $ 12,615       8   $ 18,314       12   $ 166,745     $ 154,226     $ 12,519       8
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Return on average total tangible assets

  I/Q     0.59     0.09     1.13     1.15     1.17     50  bps         (58 ) bps        0.35     1.17     (82) bps    

Return on average total tangible assets, Underlying (non-GAAP)

  J/Q     0.61       0.15       1.14       1.16       1.19       46  bps         (58 ) bps        0.39       1.18       (79) bps    

Tangible book value per common share:

                         

Common shares - at period-end (GAAP)

  R     426,824,594       426,586,533       433,121,083       443,913,525       457,903,826       238,061       —       (31,079,232     (7 %)      426,824,594       457,903,826       (31,079,232     (7 %) 

Common stockholders’ equity (GAAP)

    $ 20,453     $ 20,380     $ 20,631     $ 20,718     $ 20,884     $ 73       —       ($ 431     (2   $ 20,453     $ 20,884     ($ 431     (2

Less: Goodwill (GAAP)

      7,050       7,050       7,044       7,044       7,040       —         —         10       —         7,050       7,040       10       —    

Less: Other intangible assets (GAAP)

      63       66       68       71       74       (3     (5     (11     (15     63       74       (11     (15

Add: Deferred tax liabilities related to goodwill (GAAP)

      376       375       374       373       371       1       —         5       1       376       371       5       1  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Tangible common equity

  S   $ 13,716     $ 13,639     $ 13,893     $ 13,976     $ 14,141     $ 77       1   ($ 425     (3 %)    $ 13,716     $ 14,141     ($ 425     (3 %) 
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Tangible book value per common share

  S/R   $ 32.13     $ 31.97     $ 32.08     $ 31.48     $ 30.88     $ 0.16       1   $ 1.25       4   $ 32.13     $ 30.88     $ 1.25       4

Net income per average common share - basic and diluted and net income per average common share - basic and diluted, Underlying:

                           

Average common shares outstanding -basic (GAAP)

  T     426,613,053       427,718,421       434,684,606       445,703,987       458,154,335       (1,105,368     —       (31,541,282     (7 %)      427,165,737       459,426,685       (32,260,948     (7 %) 

Average common shares outstanding -diluted (GAAP)

  U     427,566,920       429,388,855       436,500,829       447,134,595       459,304,224       (1,821,935     —         (31,737,304     (7     428,292,580       460,857,535       (32,564,955     (7

Net income per average common share - basic (GAAP)

  K/T   $ 0.53     $ 0.03     $ 0.98     $ 0.97     $ 0.95     $ 0.50       NM     ($ 0.42     (44   $ 0.56     $ 1.87     ($ 1.31     (70

Net income per average common share - diluted (GAAP)

  K/U     0.53       0.03       0.98       0.97       0.95       0.50       NM       (0.42     (44     0.55       1.86       (1.31     (70

Net income per average common share - basic, Underlying (non-GAAP)

  L/T     0.55       0.09       0.99       0.98       0.96       0.46       NM       (0.41     (43     0.64       1.89       (1.25     (66

Net income per average common share - diluted, Underlying (non- GAAP)

  L/U     0.55       0.09       0.99       0.98       0.96       0.46       NM       (0.41     (43     0.64       1.88       (1.24     (66

Dividend payout ratio and dividend payout ratio, Underlying:

                           

Cash dividends declared and paid per common share

  V   $ 0.39     $ 0.39     $ 0.36     $ 0.36     $ 0.32     $ —         —     $ 0.07       22   $ 0.78     $ 0.64     $ 0.14       22

Dividend payout ratio

  V/(K/T)     74     1,398     37     37     34     NM         NM         140     34     NM    

Dividend payout ratio, Underlying (non-GAAP)

  V/(L/T)     71       451       36       37       33       NM         NM         122       34       NM    

 

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NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS, CONTINUED

(in millions, except share, per-share and ratio data)

 

          QUARTERLY TRENDS     FOR THE SIX MONTHS ENDED JUNE 30,  
                                        2Q20 Change                 2020 Change  
          2Q20     1Q20     4Q19     3Q19     2Q19     1Q20     2Q19     2020     2019     2019  
                                        $     %     $     %                 $/bps     %  

Salaries and employee benefits, Underlying:

                           

Salaries and employee benefits (GAAP)

    $ 513     $ 549     $ 502     $ 508     $ 507     ($ 36     (7 %)    $ 6       1   $ 1,062     $ 1,016     $ 46       5

Less: Notable items

      4       10       6       5       2       (6     (60     2       100       14       3       11       NM  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Salaries and employee benefits, Underlying (non-GAAP)

    $ 509     $ 539     $ 496     $ 503     $ 505     ($ 30     (6 %)    $ 4       1   $ 1,048     $ 1,013     $ 35       3
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Equipment and software expense, Underlying:

                           

Equipment and software expense (GAAP)

    $ 142     $ 133     $ 133     $ 130     $ 126     $ 9       7   $ 16       13   $ 275     $ 251     $ 24       10

Less: Notable items

      —         1       3       —         —         (1     (100     —         —         1       —         1       100  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Equipment and software expense, Underlying (non-GAAP)

    $ 142     $ 132     $ 130     $ 130     $ 126     $ 10       8   $ 16       13   $ 274     $ 251     $ 23       9
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Outside services, Underlying:

                           

Outside services (GAAP)

    $ 131     $ 135     $ 142     $ 128     $ 118     ($ 4     (3 %)    $ 13       11   $ 266     $ 228     $ 38       17

Less: Notable items

      12       18       20       14       5       (6     (33     7       140       30       9       21       233  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Outside services, Underlying (non-GAAP)

    $ 119     $ 117     $ 122     $ 114     $ 113     $ 2       2   $ 6       5   $ 236     $ 219     $ 17       8
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Occupancy, Underlying:

                           

Occupancy (GAAP)

    $ 82     $ 84     $ 88     $ 80     $ 82     ($ 2     (2 %)    $ —         —     $ 166     $ 165     $ 1       1

Less: Notable items

      3       4       8       —         —         (1     (25     3       100       7       —         7       100  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

Occupancy, Underlying (non-GAAP)

    $ 79     $ 80     $ 80     $ 80     $ 82     ($ 1     (1 %)    ($ 3     (4 %)    $ 159     $ 165     ($ 6     (4 %) 
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

   

 

 

   

 

 

   

 

24


Table of Contents

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS - SEGMENTS

(in millions, except ratio data)

 

        SECOND QUARTER 2020     FIRST QUARTER 2020     FOURTH QUARTER 2019  
        Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated  

Net income (loss) available to common stockholders:

                         

Net income (loss)

  A   $ 320     $ 221     ($ 288   $ 253     $ 236     $ 179     ($ 381   $ 34     $ 209     $ 231     $ 10     $ 450  

Less: Preferred stock dividends

      —         —         28       28       —         —         22       22       —         —         23       23  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common stockholders

  B   $ 320     $ 221     ($ 316   $ 225     $ 236     $ 179     ($ 403   $ 12     $ 209     $ 231     ($ 13   $ 427  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets:

                         

Average total assets (GAAP)

    $ 71,634     $ 65,280     $ 42,879     $ 179,793     $ 68,415     $ 59,005     $ 39,757     $ 167,177     $ 68,069     $ 56,407     $ 40,170     $ 164,646  

Less: Average goodwill (GAAP)

      122       52       6,876       7,050       122       48       6,876       7,046       122       46       6,876       7,044  

Average other intangibles (GAAP)

      41       6       18       65       43       6       18       67       63       6       —         69  

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

      2       1       372       375       1       1       372       374       1       1       371       373  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets

  C   $ 71,473     $ 65,223     $ 36,357     $ 173,053     $ 68,251     $ 58,952     $ 33,235     $ 160,438     $ 67,885     $ 56,356     $ 33,665     $ 157,906  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets

  A/C     1.80     1.36     NM       0.59     1.39     1.22     NM       0.09     1.22     1.63     NM       1.13

Efficiency ratio:

                         

Noninterest expense (GAAP)

  D   $ 735     $ 213     $ 31     $ 979     $ 738     $ 221     $ 53     $ 1,012     $ 718     $ 219     $ 49     $ 986  

Net interest income (GAAP)

      814       419       (73     1,160       793       365       2       1,160       796       363       (16     1,143  

Noninterest income (GAAP)

      428       144       18       590       357       125       15       497       296       175       23       494  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue (GAAP)

  E   $ 1,242     $ 563     ($ 55   $ 1,750     $ 1,150     $ 490     $ 17     $ 1,657     $ 1,092     $ 538     $ 7     $ 1,637  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio

  D/E     59.19     37.93     NM       55.91     64.16     45.06     NM       61.10     65.74     40.60     NM       60.28

 

        THIRD QUARTER 2019     SECOND QUARTER 2019  
        Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated  

Net income (loss) available to common stockholders:

                 

Net income

  A   $ 251     $ 196     $ 2     $ 449     $ 213     $ 216     $ 24     $ 453  

Less: Preferred stock dividends

      —         —         17       17       —         —         18       18  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common stockholders

  B   $ 251     $ 196     ($ 15   $ 432     $ 213     $ 216     $ 6     $ 435  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets:

                 

Average total assets (GAAP)

    $ 66,365     $ 55,614     $ 40,131     $ 162,110     $ 65,485     $ 56,135     $ 39,869     $ 161,489  

Less: Average goodwill (GAAP)

      122       46       6,876       7,044       119       45       6,876       7,040  

Average other intangibles (GAAP)

      66       7       —         73       73       7       —         80  

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

      1       1       370       372       —         —         370       370  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets

  C   $ 66,178     $ 55,562     $ 33,625     $ 155,365     $ 65,293     $ 56,083     $ 33,363     $ 154,739  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets

  A/C     1.50     1.40     NM       1.15     1.31     1.54     NM       1.17

Efficiency ratio:

                 

Noninterest expense (GAAP)

  D   $ 718     $ 213     $ 42     $ 973     $ 715     $ 217     $ 19     $ 951  

Net interest income (GAAP)

      799       360       (14     1,145       799       371       (4     1,166  

Noninterest income (GAAP)

      336       133       24       493       277       149       36       462  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue (GAAP)

  E   $ 1,135     $ 493     $ 10     $ 1,638     $ 1,076     $ 520     $ 32     $ 1,628  
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio

  D/E     63.28     43.35     NM       59.40     66.43     41.58     NM       58.41

 

25


Table of Contents

NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS - SEGMENTS (CONTINUED)

(in millions, except ratio data)

 

          FOR THE SIX MONTHS ENDED JUNE 30,  
          2020     2019  
          Consumer
Banking
    Commercial
Banking
    Other     Consolidated     Consumer
Banking
    Commercial
Banking
    Other     Consolidated  

Net income (loss) available to common stockholders:

                   

Net income (loss)

   A    $ 556     $ 400     ($ 669   $ 287     $ 415     $ 443     $ 34     $ 892  

Less: Preferred stock dividends

        —         —         50       50       —         —         33       33  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to common stockholders

   B    $ 556     $ 400     ($ 719   $ 237     $ 415     $ 443     $ 1     $ 859  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets:

                   

Average total assets (GAAP)

      $ 70,024     $ 62,142     $ 41,319     $ 173,485     $ 65,247     $ 55,884     $ 39,824     $ 160,955  

Less: Average goodwill (GAAP)

        122       50       6,876       7,048       119       34       6,876       7,029  

Average other intangibles (GAAP)

        42       6       18       66       64       5       —         69  

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

        2       1       371       374       —         —         369       369  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Average tangible assets

   C    $ 69,862     $ 62,087     $ 34,796     $ 166,745     $ 65,064     $ 55,845     $ 33,317     $ 154,226  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Return on average total tangible assets

   A/C      1.60     1.29     NM       0.35     1.29     1.60     NM       1.17

Efficiency ratio:

                   

Noninterest expense (GAAP)

   D    $ 1,473     $ 434     $ 84     $ 1,991     $ 1,415     $ 426     $ 47     $ 1,888  

Net interest income (GAAP)

        1,607       784       (71     2,320       1,587       743       (4     2,326  

Noninterest income (GAAP)

        785       269       33       1,087       524       299       67       890  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue (GAAP)

   E    $ 2,392     $ 1,053     ($ 38   $ 3,407     $ 2,111     $ 1,042     $ 63     $ 3,216  
     

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Efficiency ratio

   D/E      61.58     41.25     NM       58.43     67.01     40.84     NM       58.70

 

26

v3.20.2
Document and Entity Information
Jul. 17, 2020
Document And Entity Information [Line Items]  
Entity Registrant Name CITIZENS FINANCIAL GROUP INC/RI
Amendment Flag false
Entity Central Index Key 0000759944
Document Type 8-K
Document Period End Date Jul. 17, 2020
Entity Incorporation State Country Code DE
Entity File Number 001-36636
Entity Tax Identification Number 05-0412693
Entity Address, Address Line One One Citizens Plaza
Entity Address, City or Town Providence
Entity Address, State or Province RI
Entity Address, Postal Zip Code 02903
City Area Code (401)
Local Phone Number 456-7000
Written Communications false
Soliciting Material false
Pre Commencement Tender Offer false
Pre Commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Common Stock [Member]  
Document And Entity Information [Line Items]  
Security 12b Title Common stock, $0.01 par value per share
Trading Symbol CFG
Security Exchange Name NYSE
Series D Preferred Stock [Member]  
Document And Entity Information [Line Items]  
Security 12b Title Depositary Shares, each representing a 1/40th interest in a share of 6.350% Fixed-to-Floating Rate Non- Cumulative Perpetual Preferred Stock, Series D
Trading Symbol CFG PrD
Security Exchange Name NYSE
Series E Preferred Stock [Member]  
Document And Entity Information [Line Items]  
Security 12b Title Depositary Shares, each representing a 1/40th interest in a share of 5.000% Fixed-Rate Non-Cumulative Perpetual Preferred Stock, Series E
Trading Symbol CFG PrE
Security Exchange Name NYSE