CFG - Earnings call transcript Q4 2020 | Citizens Financial Group, Inc.

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Operator

Good morning, everyone and welcome to the Citizens Financial Group Fourth Quarter and Full Year 2020 Earnings Conference Call. My name is Alan, and I'll be your operator for today. Currently all participants are in a listen-only mode.

Following the presentation, we will conduct a brief question-and-answer session.

As a reminder, this event is being recorded.

call Kristin the President, Executive turn Relations. Investor I'll over Silberberg, to Vice Now, begin. may you Kristin,

Kristin Silberberg

Thank morning, Alan. you, Good joining you us. for everyone and thank

Saun; also can will morning, CFO, year fourth results this our presentation and full Bruce First, which our you Chairman quarter and Banking; Investor here John on Commercial Brendan Coughlin, an provide Van Woods, questions. Relations to happy take of color. additional website. referencing our provide overview Head of to After and find of CEO, Consumer be Banking McCree, the are presentation, and we'll Don Head

Our on may will forward-looking cause Page presentation. X subject outlined from is that to comments results are today materially of differ the statements, risks which our expectations. uncertainties review include your and These to for

measures. reference also non-GAAP We financial

it's to our to presentation will the results reconciliation X that, Page the Bruce. review hand and on I of appendix. With the in over important So GAAP

Bruce Van Saun

Good everyone, our Thanks, Okay. for joining today. call morning Kristin. and thanks

performance are resilient given quarter as XXXX. and with adaptable We pleased full proved unprecedented we that the challenges for we the and of the the year fourth for delivered financial

fourth and We our business Mortgage on next retail our resilience our continue is and businesses and highly team Capital loans. on We performance. round of working Markets the of demonstrate delivered our as to customers with remain model the of strong focused quarter care diversification taking branches PPP opened

financial I'll a continue which take value. well risk franchise future the you we will briefly and for the our to well strategic comment progress us growth details. managing we're I'll of through and headlines feel let we on position on make then Now, our John initiatives, and few for

normalization leverage EPS ago PPNR as a was year X% was growth $XXX Note pre-seasonal million provision are year versus the was our QX was helped and year-on-year. of $X.XX, from operating more drive origination front QX million that, we and book XX.X%. provision underlying strong the a on Both delivered levels credit full-year returns. XX%. the leverage ROTCE X% to basis was operating $XXX our Our ago quarter, up our

we a X.XX% ex-PPP our a gives and capital commence XX%. capital of On This and loans great strong XXXX. maintained ACL position reserve the management quarter. strong capital was today ratio deal We will us purchase the share front, in CETX flexibility authorization $XXX announced of activity during we and million ratio

also and loan attractive We in look position finding ample for will to capital opportunities our to work put liquidity growth.

further all with NCOs, in Our credit the lower trending assets quarter forbearance. criticized NPAs and customers are metrics, in favorable and all a drop in

XXXX. we better XXXX revenue, to additional basis is higher at overall We consensus, and our segments for as the most continue very less feel pandemic in PPNR slightly lockdowns to the Provision we improving a credit. of assume X% basis XX expenses economy and and current we XXXX, which see to affected steadily points respect NCOs see will that XX basis allocate performance charge-offs. well GDP growth on and guidance XX to be than for relative strong. We by industry our With reserves is to points points as around to coverage relative much

earnings given to XXXX, and on the be mortgage but reserve economic bounce picture, slightly how our as more is transition our will pre-COVID So big towards in will up release a this be lower Big PPNR in credit we outperformance lower returns the back made dependent will recovery. levels. than path costs, XXXX for of in

performing by well for colleagues in rising that, like all great to our New towards count bank. our turn we and the end in a you do in Citizens for feel occasion becoming continue I'll can execution all, We Year. very to journey by delivery So and are over and we of we XXXX on well in a and strong delivering effort to top stakeholders positioned it again know year a the John. in I'd XXXX my all With XXXX. remarks thanking to

John Woods

good everyone. and morning Bruce, Thanks,

our our start income, Let's a for expense quarter. with headlines prudent Citizens quarter and continued discipline an with steady initiatives. and outstanding the was strong brief execution overview of for fee This good credit against strategic

delivered of record backdrop, $XXX year, supported performance the fee driven run the financial TOPX up basis we For underlying approximately end, investments ambitious against with Mortgage, year. for challenging income Markets achieved in expense up the XXX efficiency million over and we points to Capital positive ratio this which rate to strategic savings, by delivering by approximately $XXX Wealth. results PPNR full million year record of XX% across record We our our XX% leverage targets. operating the To and ongoing X% XX% benefits in deliver including initiatives improved

negative building reserve XXXX, as in in loan on We and even full the to our of Average around X% year total stimulus associated run-rate expense to liquidity. X.X%, program education of of million CECL. end deposits of our ROTCE grew $XXX under increased point-of-sale which well growth government deliver build of PPP to impact million which expect faster on benefit $XXX further million with and impact a result X.X% reflects includes consumers benefit loans. commercial Strong was for financing track at XXXX. $XXX a as $XXX pre-tax the puts million XX%, by approximately clients the demand

ACL at PPNR with quarter loan at share finally, up end, value CETX Our than $XX.XX was funded with dividends. on compared of year, year per unchanged a stable compared bill growth ACL ratio but X% XXXX tangible year-end year. book X% our And doubled was XX% year-end ago. our and the more last the Strong

for XXXX $X.X outline just of first and I'll you fourth for underlying and of a outlook to quarter $X.X income and $XXX billion. million, of EPS We takeaways reported the Next, slides then the revenue refer couple give some our and key quarter. of net

a revenue due X, performance, strong NIM. only loan income linked our Our underlying and result X% expense lower points ROTCE lower balances improvements commercial of to interest XXX down discipline recovers. economy the credit was quarter was as basis XX.X% up and in on as around Net Slide

despite impact up X asset basis basis rate well to improved challenging by deposits costs our X% points elevated funding quarter, strong X X linked low-cost from point held and with driven bearing Lower the our by decline DDA point deposit yields lower XX we However, cash as the were margin offset basis up we backdrop, grew points. down flows. in mix balances deposit to continue with basis interest and

the continued we stabilized, recent flows first the Given expect strong quarter. in deposit

will net margin near the to impact in term. cash So continue elevated

commercial in XX% areas We On our and last results pursuing proactive and like down fees and quarter. approximately and again finance our as this streams. as were growth invest delivered pricing to and loan quarter down will diversify deposits revenue we X, quarter to attractive reflecting Mortgage solid an X remain exceptional margins attractive opportunities well point-of-sale fee Slide segments. in declines in ongoing in due this efforts levels from volumes education

fees of M&A were syndications. of driven good to year-on-year, levels XX% more provide mortgage continues market and low benefit from a XX% environment. ago, this strong diversification by year in record fees which Couple loan from However the levels revenue hitting results double quarter advisory rate in linked accelerating nevertheless, and than activity

about linked to interest exchange were products activity strong, up revenue in point-of-sale X% mortgage improved operating tied down finance controlled. quarter customer were utilization variable-rate Average XX.X% positive linked by higher to and levels in and quarter XX delivered X% growth loan Slide This yields well XX% expenses average education partially on is roughly loan also core XX%. increased loans portfolios. historical efficiency commercial reflecting ratio and originations. leverage versus of retail year-over-year with decline rate to and was of and XX% a in our -- Foreign line We offset our as payoffs

to liquidity Average small trends linked mortgage. core loans our education and and built remained X% up were ratios liquidity. strong. have in flows approximately deposits XX% benefited especially year-over-year businesses up Looking were stimulus low-cost and year-over-year government due deposit categories clients as and XX consumers quarter Slide been from elevated On at and X% PPP

We the basis basis to are X basis which costs were XX down on very declined points pleased XX% during deposit to costs, XX points. our Interest-bearing progress points deposit with quarter. points basis or X

a and XX% We basis shift linked with categories year-over-year. drive towards lower-cost DDA continue to on quarter a average growth X% of

all We expect of to end to deposit interest our channels, costs year the our across the deposit down bearing execute by mid-teens manage drive improving overall mix. while down low costs the we playbook to as funding to

Moving Slide on on XX. credit to

this This better charge of improvement quarter. quarter impacted X linked Our in were energy. charge-offs most our expected metrics such loans at points dining XX returns were Nonaccrual million Net given a to Commercial is with segments activity. basis decrease basis in and $XXX commercial. from XX% decreased charge-offs points primarily this than quarter quarter. lower COVID-XX end the positive guidance accrual driven casual to offs, retail, linked as by and by repayment down commercial

in our billion addition, in In to XX% billion criticized XQ from $X.X decreased commercial $X.X XQ. loans

improvement PPP of quarter. outlook, ending at This macroeconomic the charge-offs slightly, for came primarily the with end X.XX% Given loans at the the the X.XX% reserving net loan exceeding performance and new compared the in needs down reserves but excluding originations. portfolio third robust our quarter remain reflects of

to was our that X.X% appendix I'll slides of from a the the at of CETX at overlays the within prudent the excellent quarter. end X.X% Slide is built areas improving for for that qualitative reserves shown end the for our the on concern. slightly have an But sheet increased of further sectors end PPP the ratio the as We operating end coverage year year benefit some of strength concern range. reserve year, detailed in up of from our maintained the Increasing credit the And excluding quarter. backdrop these at coverage target top third We which macroeconomic your on from from of X.X% at the identified commercial reserves X.X% XQ to XX. XX% to balance reference. at our of in third and note offset The

has capital Board up Directors of in to $XXX first beginning to trends credit of positive quarter in of Given company million our repurchase stock the authorized common XXXX. strength,

things move on Before I highlight the XX. that are some happening to company outlook, me exciting across on Slide our let

businesses continuing proposition. to through of Citizens national point-of-sale our expand Citizens new lending develop we On we are are expansion offering recently we offering further national platform our integrating the of our merchants into expansion value and our consumer focused new point-of-sale some announced add for We as on side, Pay to verticals. the the our national merchants Access to

very predictable and digital way who transparent retailer expected to payment for options with wanted purchases We experience. about week a customers excited provide next an finance a fully to major announced are through their

having a to transformation our of the the outlook app our on quarter digital and top addition, we just branch. iOS to and now year-over-year out XXXX new for Households In Mobile our our navigate launched some are on have Slide finance great customers peers month. In commercial, the making deposit be help Active XX. as of challenging in fourth transactions, We've strides robust advisory for continue in we this high increased rank we environment. level we outside our continue Android built and the executed of the this in satisfaction mobile And our on model seen near corporate customer majority commentary XX%

offset should off will Fee of good we offset partly banking reflecting the NIM high and basis related over largely in At levels to the Loans about down single expected by initiatives. digits be with expect cash X.X% to income level other to XXXX, on to year. just be NII be XXXX X%. come be by assets expect expected the year is We reinvestment the from lower record strategic acceleration high should from with X.X% fees to same half higher earning back TOP Capital time, expenses performance XXXX down assumes mid mortgage given single-digits to levels. loan high to of X%. XXXX. gradually Wealth single-digits a growth. record approximately benefits the up categories which last up be X% COVID-XX that should expense in Non-interest is by loans, in be impacted average compared This our elevated and given expected in mortgage slightly volume be program, in interest course up up down the spot Overall, down were Markets,

XX to expect average of charge-offs in the basis We points release will meaningful a range to basis net reserve provision. be loans of points XX with

Now, cover quarter for let's first outlook XX. on the the Slide

income are as count. expect digits be and We margins stable. mortgage expected and expense continue X%, seasonal impacts. due NII is Non-interest high be seasonality reflecting earning tighten single reflecting NIM to Fee up fees as assets broadly slightly banking as X% be to far expected is lower to to expected to down down day to to Both be compensation.

to charge-offs of be basis XX range average of net expect points loans. the XX to basis We in points

on a also through as trends. for We year continue to another charge-offs, franchise. good than finish less growth resilience a this demonstrate the To strong wrap expected expect up, navigate macroeconomic quarter our loan Citizens crisis and based levels we with quarter successfully and was the to the of and COVID-XX provisions

XXXX. We have Bruce. back With to are in positioned that, it I'll strong over well hand to another year

Bruce Van Saun

Q&A. up right. you, it All Thank open to let's some operator, John. And

Operator

you, Thank Mr. Saun. Van

ahead line Go of the please. Instructions] conference now Siefers call. first are will [Operator Piper the come with question the We portion Sandler. from Scott ready Our Q&A for of

Scott Siefers

Thank question. of other or team. for Good you my Bruce, one of taking management the you guys. morning, for members

or color of could later lot to the the [ph] accelerate certainly visibility expectation the from you look just of at etcetera, as data visibility give outside. not loan a on the for sort expectation, growth further AHA any but we year. there's Just understand to I in the the

confidence thoughts would you what of, So in, you have kind what that hear to that curious any trajectory? gives be into

Bruce Van Saun

Sure.

work. me Let But Brendan commercial, to about on to M&A We year. seeing a pipelines. for investors, tee is for pipeline the is good record and side, with then up M&A I'll lot quarter looking go commercial there talk fourth on ask it consumer. funds the that into to is Donald of about the had and what talk cash say and in would of a I we We're sidelines coming quarter that see opportunities PE with is the to kind

related the should of So, market transactions think increased that money kind going some and financing opportunities. I to spur into

that probably would So thing. big be the

that COVID We worries. we historically height we're draws the are XX% is thing We're XX%. at at running at their lows. line other down The at the probably historic cash touched when drew everybody XX% and XX%, of briefly

see up So to also array lending half a economy, of economy in then the I more that bit. the gives portfolios picks second us side, consumer some have And could think that as the we we the start on which real and opportunities. broad line expectation pull should a investment see just up, such utilization

from environment. of many So, benefit rate which the low

level business financing continue well. see opportunities has still see should customer mortgage well. So, to heavy We talk strong, and the for and been with originations continued the to we refinancing point-of-sale our some business student see as expect and loan also a Citizens Pay. of would base to We've business as that that real about grow continue

about and there. headlines, a stop I'll of could So maybe Don, the deeper little That's you talk commercial. kind

Don McCree

when different note were say, they the a is Yes, base really I'd I'd to thing now. say, client And or first right ago. levels are of entire completely is client months the across even activity high the XX% conversations six

liquidity, hunkered to balance So that sheets XXXX. trying for was their their bunkers build the refinance was down to trying in theme and everybody

I think Bruce it said correctly.

months a about that of a tone that advantage that economy. have on lot balance cash just now we to worried back could Capital end seeing their record to ago here get now remember get we're into begin as six pipelines. I we're some record will which think Markets right economic looking good and happen. of recovering We're companies and XXXX huge think a lot we those We of take pipelines what news into sheet. recovery, and really I a be seeing seeing clients were of of the the conversations will transactions M&A turn And balances think is we

concerns the will which into that And I the activities some of climb except individual confidence confidence build we've pandemic. level beyond moved out and to different of individual to So hope want the they CEOs companies now in and smaller package opportunistic business, small the credit very I boards, a everywhere very seeing stimulus how just too. of for begin the of

Bruce Van Saun

how Yes, consumer? about great. Brendan,

Brendan Coughlin

Yes, on start sure. a just upon I guess credit. point quick I'd

health have to all consumer economy. relatively the confidence the of of to woods, with strength, while gives of suggest us is lend out money not strong. We good And confidence the the into out indicators we're which continue

where great as predominantly they been Our are as have are which some forbearance CLTV levels coverage low dominated is our been, they've we delinquency rates by lowest mortgage and quite in the time.

banking put safe to perspective area confidence the consumer that you So a from is a gives and it us growth. stimulate place together that

Just hit mortgage. of on a Bruce the mentioned couple assets,

originations We expect run-up in year. a next

we are balance is like will little a growth which up out, margins refinancing of down, trillion, very as year-over-year, project around is down some loan but sheet we'll in student markets $X.X hit come bit a has mortgage the As a environment John strong and pointed a rate lot mortgage a potentially see which bit boomer.

million student million. quarterly for normalized refi our QX. $XXX originations had about So was prior rates ticking in loan We down to $XXX

opportunities continue we to think in and auto, that wanted XXXX. Point-of-sale with that reasonably it's for is to returns strong spot demand part printed an to while seen have the to long some size the the to the franchise. basically So on a quite future excess that say very have got up to on the the we lot growth year. very new XXXX will moderate growth of expect just that that there, for portfolio very that term in we given of all I'd strong lastly, burn half of are this time we the the for we've customer auto to the partners tripled highest board moderate the in concentration hand we bank. of a still hand [Indiscernible] up of credit of incredibly grow some back in by duration short has brought the And assets some in be good a non-Apple suck high which way cash on and with of in the a growth of case business we we in that in see see uptick some cash auto we we've quickly. our And is pretty continue for of profile opportunistically aspirations XX this rest strong customer

consumer So, all growth in pretty substantial year. ability all, we're the in next pretty drive confident to

Bruce Van Saun

question, the for Thanks Okay. Scott.

Operator

Your next is Go the open. line with Matt of your question will come from O'Connor ahead, Bank. Deutsche line

Matt O'Connor

obviously the Good strong at you There's how deposit might of Obviously morning. have very kind longer-term but been much here? which do including growth sticky be has in of business will of for industry, you've start are any Citizens, versus to that sense invested Bank frame when be but that? of in leave arguably the deposits, unwind of what some management brought Central might sticky, do you treasury how kind what

John Woods

things, Matt. yes think of the But of have be where the going customers deposit you're there, portion seeing opportunity do us We in in we to down think optimize that deposit on and -- will an these significant have interact I'll and gave those some we of on deposits a Yes, just deposit term will deeply. the good us with we jump sticky. And flows run gives do side, significant side DDA we it to opportunity increase more this and around. seen stick

that running run throughout those Stimulus XXXX, will than cash like it's expect to off, into but on and and parking year. longer not balances rise year, that some deposits has our gradually deploying the down in growth of the to you that's the will all optimizing due loan come we really we deposits deposits do think as about over balances held got down we and You've thought. suspect cash balanced

will portion So, stick around. of a good it

Brendan Coughlin

still point three away we Matt, that's in and add consumer on top deposits scrape up COVID scrape try the let years, side. surge performing believe leading the set that just peer last one when to deposits, have we XXXX the to on been case. When me you low-cost of the we

And underlying Consumer the consumer so, and help metrics driven Bank. a by that's engagement in

surge we peers at outperform deposit for XX are aside putting believe to very a to months. all next And in strong continue position, so the the least I COVID

Don McCree

Yes.

over last that of Let five me treasury on that sales just on the we've a investments add thing were up one commercial the side, made that or lot the last the back of year years business. four XX% our in

it of of that result all but some will DDA not in So growth, will.

be Some it DDA. and of some fees be will will

seeing sales on which treasury we're momentum So quite healthy. is the side,

Matt O'Connor

at your price these on liquidity to And the going deposits somewhat a related, and point yields you is optimistic forward? growing absorb going appetite as what's from to loans, securities either or which you're Obviously mentioned. add

grow you banks mortgage? as do are even we down come for think how meaningfully you. about the book So quite some securities rates have where, seeing Thank

John Woods

part book reason given through have and not that as we've rise call that half Yes, securities mean operate that, was thanks the for balances lot well. attractive. cash like primarily which off second is in we're on in held our And mortgage-backs, the and the for Matt. I of many we patient the been of where a have for levels this levels to XXXX

As into find get on XXXX considering levels prepayments. get little improved investing we we early flows ourselves the may we back part have bit otherwise the that cash you a the so and of

it's continue to in at cash and than a may bit see situation little work We've piling more the if possibly in rise the early and rate But cost may a ourselves where securities averaging January that hang plays mean, in that will, or reinvesting little find into a the if to in quarter. to won't a in dollar of February that bit more think this stop some and March, pre-investment, levels. we wait a and later out. little capture this you we all see going want and in or extent done sort of put cash I in heavily then rather but of I that this that bit of investing quarter securities. say, Let's a all little do see these rates to us rise, we you of mortgage-backed long-term of and

Bruce Van Saun

it's And really it cash balances growth, And to the loan really that of me, us I it's than drive in the some will our have away. A) that to reasonably view. Matt, pricing targeting it also the add we be take allows terrific we're securities better would to this growth because where pre-funds just actions loan much aggressive and growth that's

got we've plan we here. engage. little rates up our So being game fairly and point flex If to a at disciplined But ready were this cautious. we're securities see and

Matt O'Connor

you. Thank

Operator

Your of come next Erika with Najarian Bank question from the America. of line will

Your line is open. One moment Ms. Najarian.

Your line is open. Go ahead.

Erika Najarian

Hi, question, good authorized million. Bruce loud on the you year. heard clear morning. the is first I and for My that this $XXX buyback process Board

test? guess timing your And if of one, participating opting of million? question. so repurchased size? what I out, it's leeway in that the And or out this stress opting terms a you does give you that opting of in And two-part in year's number $XXX are is And

Bruce Van Saun

I'll expenses or size for out start the tailwinds balance we'll whether some made nuances Maybe then sheet determination Sure. and And some a the be opt-in there's as that John color. on opt runs headwind. yet also in that could Fed's sheets be the add us. your based and we can model of bloated to haven't balance could the But

So of kind that. we're calibrating

a make to decision have by XX. February We

John Woods

have cost to [ph]. extended XX Risk March

Bruce Van Saun

stock. whether I range, limiter And over. to regardless to of buffer. we that. is plenty But a This think capital for or little of about gives is reasonably of us Thanks have our our The great. time which be opt-in hitting worried mull really more of for back we opt going our to thing out, Okay, be stress aggressive. flexibility X.XX can internal not more here to that's XX capital the a we buy us targets

enough the size. a we So program set big up with

earnings growth and to RWA big I are could as how release some there the think we cards can after wild neutralize reserve the be.

we we amount that. cover think of have that on decent if a authorization get favorability to I So,

and we loan this amount of but of of would John? color, could of expect be year amount the and the on next reserve year, into it this Any the that So, would easily over go growth most depends executed release. some

John Woods

of we Yes, slated time that's well a and in our think think the trade-offs, some our changes April good in just right. levels terms us sense take that we the and in. of keep flexibility generating where they is out to whether I the as I bit the think as help Fed in history. gave in determine I -- mean, I of how it's terms really of of, profile model there seen we've it to But opt now PPNR PPNR would we we on it's can it high it and fact forecast relates some that makes little understand

converts positive going this that those us understand in. that -- total in now that So, assets as incur. basically that also were that are then lean all somehow up understand expenses Bruce shows might we're that towards to of model opting we into articulated, then But and all holding cash we that the

have pen benefits we paper here do calculate are going of opting And what so frankly think to put and the to to in. we're just that

so the we of our it's handled academic evaluate We of coming buyback opt-in in scenario the sort constraint. SEV and ways I lot all importantly a will see basically whether operating also it's of question. And that, terms an and to get exercise think but or of Bruce levels, is more not our the this not year. in And

Erika Najarian

on outlook out disappoint, of of optimistic slide X.X% getting what Got as second if from I sounds appreciate this X% end growth is reflective or expense fully loan thinking, outlook if this well my would for guess that of question second the you range what Slide does breaks outlook. XXXX you like those at on non-interest just half Really how as the any disappoints look XX, range? like? the components more revenues mortgage question guess And volumes. is your I'm budgeted XXXX. which lower it. to I And a here to And my down, of

Bruce Van Saun

Yes, I you down maintain in that have year the I think and seeing through. always we visibility cap not come make earlier mean revenues call. flexibility Obviously, the we're to expenses if

base expense the going have in You're to impact the on year. a bigger current

a volume-driven making, the than strategic on space Erika first to and program out You the but those And that some even the back they be could again. TOP ones that then investments, adjust would we upsize and well. bit is well could slide the to we as lower could can look there adjust that to we're see range, of that always expenses then, go that

a there going pretty this At a will and we if little half think year; that. making. we're actually that be levers is, we're of point is of the be sanguine can avenues quite up number came it the pull the have second slower first So that nicely however, I there the so and that's going to half recovering it that we economy but is pick the call in to year, in

John Woods

And line. I creates of add on normalized fair jump XXXX. of the a to mortgages expense really that expense from in kind variability And expenses, you non-interest for flat bit XXXX just to mortgage and might if is just XXXX

So, I important think that's an point.

Bruce Van Saun

growth. Ex-mortgage

John Woods

years, of throughout just which if normalize And operating is Yes, sort if ex-mortgage to continuing to us leverage each of basis growth even to back those on that an you of allows positive it XXXX levels. kind you important. ex-mortgage drive

Erika Najarian

you. Very helpful. Thank

Operator

ISI. line Evercore with the will next John of Your question from come Pancari

is line Your open.

John Pancari

develop updated on to capital markets mentioned levels opportunities banking wanted non-banks, the you thoughts your side both morning. you're could, side the on Good on to us as give know given the see you've capital your I partly as to M&A particularly, I capital just markets your starting thoughts the see I Bruce whole on side. the and get well wanted if opportunity. given bank on and

banking your So, interested if you're on Thanks. deepening capabilities that front. exploring

Bruce Van Saun

for a in lack but conversations, a XXXX, had of us number year Well, and buyers then of we Sure. we very for to fit. cultural that relatively not looked a disciplined trying, number strategic of and remained things of it financial at in quiet the need certainly terms and profile also was see the

can and things continue in dialogues, some see think -- we'll we outreached and And so engage in we'll I 'XX. those have to get done if

of over terms of on acquiring just we've the in consistently last fee-based businesses. augmenting several our in Just capabilities been focus, our terms years

That we customers. activities IPO to customers. was the they're are our certain we So, at weren't that important gaps quite of that that days was important had more for one we can and scaling from do the our

wealth we long addressed we're also industry active yet selective opportunities in with address acquisitions. fully vertical opportunity in some we've cementing the approach so the augment pretty area. our but there that here, the be think We've And conversations boutique us to I space. M&A mortgage could much still capability in gone towards to a then, and for So, wealth way

scale, and organic out I there. what's from sense. may made prioritize we've the going keep that some and really and that that In a customer we be move terms approach see we'll is prioritize our But growth, anything makes be to there to in that the our it, periscope capabilities, digital there base race us lot direction. something geography is we're see have a we quite there certainly we've kind just of if bank a that of standpoint, open of out But sense things see bank, think financial interesting growth turn there disciplined for and whole -- and of to on been for to in

John Pancari

give an expecting separately And that's year? why don't your just expected regarding you they when programs? you, then partnerships, merchant Thank more it to performing? are us the performing And this from to how on they've returns add Thanks. helpful. Have been this comes been the update you as there on --

Bruce Van Saun

that ask one. I'll Brendan handle to Brendan?

Brendan Coughlin

around performance those of yes, been the found short that into negligible. percentage When the on of way woods customers is have. out forbearance credit answer that merchant down in flat to their again, you and the while of asset Yes, is not business the environment us. delinquency has the they on The at look we're

like And that portfolio the customer's base around at on essentially drafted and there no is and so created the with is that positive frictionless operating customer digital that's account we recession the going gets a lot the by every month. the driven payment of automatically out experience us,

be of signs returns credit card risk those seems credit The the business about but by encouraged card performance. likes. profile like, of lower credit are very we're so to than And the

outsized portfolio you the getting You're would from expect. returns than otherwise

So we're about that. excited

big platform sort marketplace partnership the in about new introduction takes another or which time relatively in next And going the really play the entering announcement that XX. I gotten have to first-mover Pay teased a in advantage. is As that that key two we level. XX that encouraged excited with the by our we'll the with partners the about to year. to growth as large Citizens we the We that also three XXXX. of week's we had to business are exit We're very, opportunity mentioned, John our year generated about We're very

their this this down looking are and more approve You're that Retailers economy. now can the they in seeing in at way and more dramatically industry. a about as talk merchants sales a

calls so more more giving for us And reengineer process boost. to companies try sales them revenue and inbound help looking we're their and from getting

So think we're capitalize very that's this. and poised we the of Citizens, opportunity. very on about part We to excited remain distinctive

John Pancari

you. Thank Okay.

Operator

of RBC. next Your Gerard line will ahead, Go open. Cassidy from your come with question line the is

Gerard Cassidy

to, you X, economy, outlook CECL John, tell on half the reserve Obviously, Bruce. Thank can level very of us recall think because Good morning, of the clear are to for loss loss will about your loan that the and to loan post the guys based I second X.XX%. Can you you. see data, peers and was which improving you XXXX have reserve you the XXXX if get year. the is loans especially January on because what John. I very reserve you in likely think morning, us. Good for your share releasing good credit, been with

higher? well above future, in be of something kind the obviously is should that think Do will or to You're target look it that. area you -- that we

John Woods

that when XXX one day into for a I that credit we that on decade a a CECL. look Yes. a something around I costs, I Gerard. of XXX. I XXX mean, it's you point regarding in of hadn't I good had leading The back one question, think think neighborhood sort good it's thing about the guess, think anchor at cycle mean that we that

sometime would of a probability sort the that of was waiting there projection. So over the expect a horizon happen credit CECL cycle to

We're what's think cycle. We now And so going going the through on had in certainly are one. cleared getting ways, decks a there's some we out. that

happens we unlikely neighborhood. could quarter, environment level could to of and the levels, quickly. end that our terms you ratios, as higher the about to environment as higher we the if of in would trajectory than suggest a XXXX. relatively be for to down There expect high. things improve a as coverage The We're it the January which I here arguments your than possibly that the improved resting in pretty I it's towards quite what is think maybe that. to economic mean, we're as those significantly it we think mix continues in be pretty And if it from other timing towards I going that given that talked be could to our are be be in just I get move wasn't that little start so you current of I are that that. things are really it but to maybe reflected in is and good an even think we that all results our when terms that mean that but that for continues, And in higher, it, end mean towards of you the it think guess given economic timing, point the much of here be heading And heading some fourth improve, mine, things CECL year. got that significantly year would about. about but going wouldn't level you little as do get lower, got into pretty

Bruce Van Saun

though. to just Yes. I would that add

overtime. you Gerard, to I have really think, look at this

part between John said, XXX that. XXX so to and that has how place. we recovery, in are or, in think and of better where much will way, the be lot all It's a of as slightly that terms get economic I out stimulus play we'll maybe somewhere resting of

below So out. somewhere make the will to it see there, on things be the I but we'll have way certainly strides in think how X%, we'll middle, towards getting and play down and

Gerard Cassidy

you, bigger Bruce. We good. A for for trajectory Very picture question that and like your you peers.

we Your concur outlook which quite is optimistic with.

So potentially there many XX your and when field you what knew about obviously positive as months, it as we're to peers, well from you when for with about? bad is banks including be the go night? elevator so worry we nobody to on down own. you do worry is the at be you the what's seems over go like risk pandemic all was the But what down that how left as at your just night, elevator And the the you expect Because of about worry was. you something out going next

Bruce Van Saun

that next we're outlook the guess we and I with that improving, the the Yes, economic increasing vaccinations, recovery that getting comfort will with is year. stimulus have

been So in worry I a may wouldn't -- that big have XXXX.

I down think going the it's less today elevator. worry

risks. think I other go back to managing you

a running that's are assets data customer is hell we're is cyber the and is there sure things mind, lot are of our safe, safe fraud For top example, whole spending etcetera. the a that the something and that of out way risk banks and of all time making

been the banks, that invest and have competition switch the so go customers all given list out for I the a technology Brendan? to Anything I in that focal the job of a be I'd new capabilities. mega no really there, from we've out customer reasons in motivated really would invest else, and smaller the really desire invest And great since big faced delight that at one think and they that from at from we guess banks. in comers kind point intense for us of customers, for point. continuing next from to is thing non-banks our peers, FinTechs, and it's our do keep that banks, and is certainly other So top of the IPO the all to competition competition experience, so the is from this

really can to else customers the customer second be so more if close thing relationships, the add? I second pick like we had our So on for list. those to I do Guys, probably anything you'd to and would cement

Brendan Coughlin

circle digital, with of by very through COVID positioned. that we're just I think, speed confident of it's transformation on the going and and accelerated at the a the such where sizable. will and investments, the that substantial the the end is but I a feel can be winner's best with the and two making I right think a executing banks the exceptionally industry change, next market in just fast I on time The pace moving about quite think execute years' we're

Bruce Van Saun

Change management; number that's three. probably

Brendan Coughlin

Yes, I agree.

Bruce Van Saun

question, Gerard. the Thanks for

Gerard Cassidy

you. Thank

Operator

will the come question Jefferies. next of Your with Ken line from Usdin

Your line is open.

Amanda Larsen

for Ken. for just in can PPP guide XQ, in is notional? everyone, Hi 'XX? touch the embedded in talk 'XX? earned in income how amount John, on to you And compares in and forgiveness dollar Maybe income that Amanda of on the Larsen NII this about what's your

John Woods

from Sure. are off upon, when, going and general, over compared Yes, XXXX. in round quite two, but XXXX round I XX has mean just line. for in been to hours, then started us based one last a but us little a I around may really in, on which for think is there's comments big similar XXXX pretty our drop we similar give might that, there actually And coming actually picture, the way XXXX on outlook few the earnest Brendan and head two the well pretty and from NII profile not have come

over so the amortizing Forgiveness, round two-year the this been the lower have the forgiveness. the know less into you deferred period, in account fees period way we the and in we the farther one that as on may you get two-year at round impact one

impact And either as XQ. be XQ very so won't And it's pretty a stable. big forgiveness well, is actually not XQ in in or it

talk to that's way about so basically And that. best

Bruce Van Saun

to Brendan, up off and we accepting and and on just view yesterday. I latest start program, running terrific just, offer PPP a and maybe a PPP we're we're can could because the you pivot

Brendan Coughlin

we the first PPP round. that of in round latest of mentioned embedded in The absolutely. less started than John yesterday has the Bruce outlook originations saw as and Yes, our half

little incredibly day was pushed overnight really, application well little $X a billion strong. first and The We of with over a dollars. exceptionally technology worked shy up We executed ended really bit applications bit in XX,XXX well.

the driven it's So one but on heavily heavily, round borrowers. by TBD funding, PPP

rate customers of confidence got conversion we've existing And for so will the be ours. pretty high

next demand expect very strong pleased we're over performance on weeks very, pretty by be one and So a couple to day the here. our of we

hard So the small it's of full size are demand weeks a than if to day all positive. get on our one businesses, we'll very gauge more and thought, this pushes we in state TBD signs higher on coming given the know the but up the from

Amanda Larsen

consensus the quick great. result initiative spend strategic future that, stay the the pandemic initiatives if or And have to forward for are next believe of million Okay, can as biding guess then on. a I question, Would my something you investment follow-up that else an acceleration do or to driven reasonable typical And in expectations earned I is as I of pull a it after banks trend for most than spend strategic investment of year? you seems cost or, higher $XXX a by a characterize amount new 'XX a be for largely spend. a

Bruce Van Saun

we Yes, worked the in our protect strategic really to over have try hard spend initiatives. years think to investment I

us operating positioning delivering big for So TOP leverage, it line. to our positive but growth things has need keep growth and top we been to if the of future also a self-fund us allows in contributor

advantage opportunity for So, that have that opportunities continuing I is see the are think look think their that the $XXX in and they million to of strength. where ones position feels and where they come pandemic banks I well out are right, going areas that to are the to

Amanda Larsen

And a in of sense. do of the upside TOPX an makes you may as then 'XX? that result incur charges expectation you non-recurring for have expenses, Okay, or

Bruce Van Saun

don't versus [indiscernible] that an you difference? why underlying take John,

John Woods

think, mean tapering and at have in a is yes, but the seen that lesser I that you Yes, would concentrated and pace XXXX first would be much likely yes, magnitude I that half in and of off.

again, year lower half the actually of throughout costs XXXX bit off more be But associated at the lot but in So a magnitude year-over-year. have activity in the little been first in a incurred our a and tapering XXXX. there'll with

Amanda Larsen

Okay. Fabulous, thank you.

Bruce Van Saun

Okay.

Operator

line question will the Your come Zerbe Stanley. next Ken Morgan with of from

open. is line Your

Ken Zerbe

your just the first is thanks. got course means full If it quarter $XXX, call roughly $XXX I numbers of great, right, NIM sounds year like right, All Actually guidance the the just topic. over all NIM it which lower your versus staying NIM of the you do actually are should how just you about much such? either higher balances the year, tenure cash talk there? Can pretty Thanks. noticeably. expect and the drivers as -- the drivers Is it on the

John Woods

and I'll do dissipate expect take will that we I throughout Yes, mean balances go I that XXXX. that. cash ahead think

aggressively in are general. term earlier, we levels and optimizing mentioned we down deposits running deposit our As

in to would deposits get So you're mix that going shift drive. nice a

margin. in expect fall, And Some -- XX our outside positive we're deposit then costs quarter. the fourth interest at pricing, contribution we basis bearing just interest of to towards net the points

again going We the the end throughout and you mid-teens year, but go occur also item long steepening is likely we gradually that over drive XXXX. maybe the the steepening more as that by steepening end much year. quarter-by-quarter some I'd then, expect to that low of happen into occurred and on, highlight as And the curve, will still will we've got some that the not in the as has earlier to that with think month, of other certainly

put drag book, as money more that's starts of front to we to magnitude moderate starts therefore back loan been the So through that also work happening growth. that to book

those throughout So drivers highlight the are that XXXX. would I

Bruce Van Saun

beacon points all it's quite NII hold I and to to underlying and excess cash, it we put cautious really to to and the were we we to growth focused what trying how this feeling as mean NIM, when about add loan actually, on try can performing earlier, we're It's That's, NIM Citizens. to do we here. the then NII. think significant. and Ken, If cash too, inside is have think well. we I community to QX, NII so But on XX as the basis we're clear, do I been the a point cash discussed I but managing QX higher, that that work smartly. securities very trying NIM We're The obsessed analyst think get We're being number here How with NIM. really think be of a little shift, very, with less keep becomes to the focused that focused elevated on the trying has very, almost I up basis show points. these

Ken Zerbe

a sense. up then question. follow And just Completely makes separate

for Your XX you at that XX playing over course be a How guidance year, sort you're NCO I particular is little quarter your of a to XX. out? relatively or more or second sort the expect elevated sort any of do is third that shape should stay guidance mean quarter basis charge-offs? do offs and steady hill that if of you to quarter, already of Thanks. the stable a see state, charge versus points,

Bruce Van Saun

Well, the on as commercial QX. little side, a we volatile back yes, bit saw it's in

trends So now, all got tree but tall speaking, generally can you great in commercial on around credit with a hit move numbers bit, side. a get the and the the right metrics can we've little really

where So visibility. the I really think the you first looks most the half of year have good,

fast see and what's -- how benefit to you've see that to out estate. well then get going know how does it positively we subdued do half to got think second I into the goes continue could the it life, we from year, real then vaccinations, you levels. of the commercial as If

well still the the see have current. under the that come of forbearance being of those control for in come because realm coming are potential increase, and all-time And control. of a I performance. have people great go side, you within under terms metrics think And we forbearance room than, little surface and have of folks to some If consumer things issues think XX% I a then on of kind we less that's out delinquencies had in interestingly out of but

that by affected being now their the certainly industries good and credit those ability working we to And more additional not is back bridge stimulus feet. industries cross with of kind able have. COVID There kind so been people for is we've on and for hope, those to metrics and the folks get there targeted of really and disturb most the in

we're thinking we about round see we this but the it's could you stimulus think I an that -- go think that see going clear of uptick that, second actually more free it's away. talk see that just in the So, and half that year, and stimulus of the last to could -- future to -- I continue into than less can maybe out kick we're

this point, expect have pretty to we're So, say at the unexpected. sanguine but I'd you

that So, that's have why range the we do. we

Ken Zerbe

All right. Great. Thank you.

Operator

will Martinez come from question of next the line Saul Your with UBS.

is Your open. line

Saul Martinez

good Hey, morning.

the And new help for an us growth? on origination are to the question, to because gaps headwind what specifically is PPP little loan seem round pencil but EOP in on wanted sharpen one? like Just on a could bit And round something assuming single-digit high in to your even response earlier you of two Amanda's just net if it in you number would mid the XXXX? fill a there? So, forgiveness

John Woods

in we've are one we mentioned, you the two Yes. fees from recognize the that. the one round I in with which digit mean I click one accelerate as because first every contribution in quarter round year-over-year XXXX that so, longer forgiveness portion that will such that a together be that NII what the no And quite XXXX millions. single potentially line. might quarter not of think you get the through through all round and and goes is every through, contribution was got the NII similar forgiveness on of as piece, of I upon by NII just great expect PPP in a the those a portion quarter talk we now I numbers as to significant deferred to been recognizing XXXX term

account anymore, forgiveness so pretty the stuff from we we story period. the the way over and ratably least that for things not is but big with at amortize anymore a And to two-year perspective respect

stable So the contributions year-over-year.

Brendan Coughlin

program I program that the in that kind And year. second, second the the or that prevents half of of stays with year, a second first of level on in fall-off the half just that it's the add color next is would new kind of the half and PPP first a little the

relatively we're to to you revenue But would want we way fall the kind new fall We programs have first off. of that if of the levels a about it So now that we half avoid year. think through existing had PPP having off. trying stable have that the on the

Saul Martinez

bit little I here if just a guess, kind out running of interject we're I of could time. because

was have but NII. in on and $X.X color. interrupt to which net-net, single-digit though is that's two. billion, your loan not The some has is mid mid origination headwind, new that, of I to but that run-off a would growth? forgiveness it much question my question, growth, My Sorry on some a you presumably guess on I does-- that my into of round single accelerated loan guess how also headwind helpful high the to embedded high digit, it question is

John Woods

Yes.

terms in front the our of than end. originations on of dollars, earlier, less it's rough Brendan Just half as mentioned

at So the our average when the the by of balances XXXX XXXX. loan about to something of spot of end falls billion about on think you $X.X this neighborhood billion program in are $X that end billion $X to

categories. that with the that the sense we're making fact other a basically you So for can get up for

Saul Martinez

essentially, real no is There okay. headwind

John Woods

it cash. overcoming is We're to headwind. PPP. that of growth outside loan other categories in year-over-year a with is there there we Well, overcome shrinkage with the other a have And

Saul Martinez

Still headwind billion how $X one about so net-net -- round versus a the being that how how is billion net coming is i.e., about much there origination much headwind? down $X.X of a forgiveness there round to is -- on is much two is

Bruce Van Saun

the spot reasons growth high the but we're loan And reasons. is of average less. that That's that's guiding one growth, of one to the loan

Saul Martinez

the loan which I of like third recovery fourth don't exact -- being say annualized it rapid into the seems a would mean seem Because really I you're think fairly year lot the growth. very it the the Okay. and it's if going I that banks XQ, hear doubt -- rapid on very, but And first be minimal about and loan seem surface it half of you it seems-- growth that would of everything but there would imply not the with extremely half translated very, seem the growth in and I would quarter number, much the will be that doesn't know in the yourselves does rapid. acceleration second just the giving benefit being it very like economic you to

disagree your that if with [ph] -- customer just I So curious was you logic?

Bruce Van Saun

have Well, earlier we in are the standing call, and IPO. a more to our demonstrated each by the the to out in of through terms we've have recall portfolios consistently probably in guidance we we're giving, ability capture the you and I and think since loan went an we sales peers growth of

John Woods

side consumer right we're we've the in say and economic originations the economic our will now guidance I'd today current recovery an that upside. and embedded help is while ramping expected them up in

bidding that can upswing a think we're dependent we're know we that's on on don't our delivering right growth, So start massive now. I it to I going deliver, fully loan

Bruce Van Saun

Yes.

Okay, thank you.

Saul Martinez

you very Okay, all much. right. Thank

Operator

for constraints from time line have question, of the Carcache with Research. one come to which time Bill will more Wolfe Due we

Your open. line is

Bill Carcache

your basis round Good morning. buffer about test, just around on June a basis in capital capital think question the or your the range. and amount And capital was quarter math XX which you. less, in from stress the points fair test. is I of target I had below stress Thank points your one a targets. stress December By required XXX our

you see we believe but SCB that come I operating could mentioned, range John, could time. not is you your is, levels question target rather that? down constraint, expand on over your my So you're

John Woods

XX% target middle mean to in I a our off had think implied and current start Bruce to be year well here, we X.X%. the the may just but June and SCB is I I'll from part of the from would Yes, test, the add that from yes, levels below X.XX% of SCB

change SCB until required add have a you and decides And that's You Fed X% they official X.X%, of to X% and get the XX. March to that up until it. the unless minimum or the

Bruce Van Saun

it we're and lower modeling set prudent, just come back we we could PPNR so. so a X%, not I does at And interject, that's think because too high than correctly. even conservatism, pretty that much to

John Woods

would shake north from risk out levels mean our target I X.X%. want the to for think where rating in I we well we of Yes. view platform the managing of be see terms what that

it's lot high. we come do just it even ways, of play though into too a think in So

I I would the make think environment we riskier we sets, as and we the peers group any than pandemic if decks that economic the said our peers. wouldn't believes our the mean average of time than over yes, point levels don't to decline needing other I the higher So capital see platforms years our if post over and think be clear we capital our levels the

pandemic and times well to right we'll And navigate served management we Bruce and range our have and see. us which who now, so, target through the But knows allowing bad. [ph]; worked good and this us on traditionally Board

Bruce Van Saun

thanks. Yes,

Bill Carcache

last up you could wanted I And agency some portion steepening have the looks your And we curve turn it QE, on pressure need would sizable that's class. that portfolio securities MBS discuss around you one in helpful. Can to dynamics can since hoping saw I downward guys squeeze the follow spreads Thanks. rates of seeing $XXX date one. we rates what reinvestment kind like was relative If for portfolio. your you discuss investment of I of to reinvestment comments to this negative. from how quarter? to let the the you're much around pretty asset particularly have a the see to in

John Woods

in call reinvestment back running mean points creating front book basis XX call basis call it the off is to XX I back range. what's book XXX the XXX and points drag yields off Yes, the a, given run that's range, to it are book, XXX XXX range

phenomenon So, a couple over that's quarters. been occurring of that's last been the

flows $XXX were quarter. yields Last cash a positive. time million bit to a even months we'll all, not favorable. get quarter, And and we more as environment though going look bit about and mentioned that I earlier, in are of we're kind this invest to put advance We work month flow more, assets of to are up time and watching tightened little cash OAS; have rise of but and of a also a to OAS bit coming little rate yields this begin of in cash we did a bit until lot unless is June, a OAS OASs in

things there investing ahead some of bit little get lot. a to but a of doing not we're So,

Bill Carcache

you. Thank great. Okay,

Bruce Van Saun

Thank you.

Bill Carcache

Thank you, in. guys for me squeezing

Bruce Van Saun

this that point? at Is okay. all Sure,

Operator

questions There further are in no queue.

Bruce Van Saun

great. Okay,

everyone. for great day. appreciate We dialing support. in Stay everyone interest thanks your So, a Have certainly today. and well,

Operator

for and Teleconferencing. your will for and ladies that And Thank for today. gentlemen, conference you call conclude your participation using Event AT&T

may You disconnect. now

Citizens Financial (CFG) 20 Jan 212020 Q4 Earnings call transcript