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Citizens Financial Group Incri (CFG) SEC Filing 8-K Material Event for the period ending Tuesday, July 20, 2021

Citizens Financial Group Incri

CIK: 759944 Ticker: CFG

citizenslogoa05.jpg

Citizens Financial Group, Inc. Reports Second Quarter 2021 Net Income of
$648 million and EPS of $1.44
Underlying Net Income of $656 million and EPS of $1.46*

Key Financial Data2Q211Q212Q20
Second Quarter 2021 Highlights
Income
Statement
($s in millions)
Underlying ROTCE of 17.7% and underlying EPS of $1.46 reflects diversity of fee businesses and excellent credit results
Underlying PPNR of $629 million reflects:
Lower Mortgage revenue on further tightening of gain on sale margins despite strong origination levels
Record results in Capital Markets and Wealth given the benefit of investments and acquisitions to broaden our capabilities
Net interest income up 1%, with interest-earning asset growth offsetting modest margin decline
Interest-bearing deposit costs of 16 bps, down 4 bps QoQ
Well-controlled expenses, down 2% QoQ
Credit provision benefit of $213 million driven by macroeconomic improvement and strong credit performance
Average loans up 1% QoQ
Period-end LDR of 81.4%
Strong capital position with CET1 at 10.3%
TBV/share of $33.95, up 6% YoY
Total revenue$1,609 $1,659 $1,750 
Pre-provision profit618 641 771 
Underlying pre-provision profit629 661 790 
Provision for credit losses(213)(140)464 
Net income648 611 253 
Underlying net income656 626 263 
Balance Sheet
&
Credit Quality
($s in billions)
Period end loans and leases$122.6 $122.2 $125.7 
Average loans and leases123.5 122.8 128.8 
Period-end deposits150.6 151.3 143.6 
Average deposits150.3 146.6 141.6 
Period-end loans-to-deposit ratio81.4 %80.7 %87.5 %
ACL to loans ratio1.70 1.94 2.01 
ACL to loans ratio, ex. PPP1.75 2.03 2.09 
NCO ratio0.25 %0.52 %0.46 %
Financial MetricsDiluted EPS$1.44 $1.37 $0.53 
Underlying EPS1.46 1.41 0.55 
ROTCE17.5 %17.2 %6.6 %
Underlying ROTCE17.7 17.6 6.9 
Net interest margin, FTE2.72 2.76 2.88 
Efficiency ratio62 61 56 
Underlying efficiency ratio61 60 55 
CET110.3 %10.1 %9.6 %
TBV/Share$33.95 $32.79 $32.13 
Comments from Chairman and CEO Bruce Van Saun
“We continued to demonstrate the strength and diversity of our business model in the second quarter, as a drop in Mortgage revenue was partially offset by record results in Capital Markets and Wealth,” said Chairman and CEO Bruce Van Saun. “We saw modest loan growth during the quarter, and expect that to accelerate in the second half as the economy continues to grow and excess liquidity is redeployed. We are executing well on our strategic initiatives and have commenced work on a TOP 7 program, with details to be announced later this year.”

Citizens also announced today that its board of directors declared a third quarter 2021 common stock dividend of $0.39 per share. The dividend is payable on August 13, 2021 to shareholders of record at the close of business on July 30, 2021.
*References in this release to "Underlying" results exclude notable items and are non-GAAP Financial Measures. For more details on non-GAAP Financial Measures see page 13 in this release. 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.




Discussion of results:
Net interest income 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
$/bps%$/bps%
Interest income:
Interest and fees on loans and leases and loans held for sale$1,084 $1,085 $1,219 $(1)—  %$(135)(11) %
Investment securities124 128 130 (4)(3)(6)(5)
Interest-bearing deposits in banks— — 200 
Total interest income$1,211 $1,216 $1,350 $(5)—  %$(139)(10) %
Interest expense:
Deposits$42 $50 $124 $(8)(16) %$(82)(66) %
Short-term borrowed funds— — — — — — — 
Long-term borrowed funds45 49 66 (4)(8)(21)(32)
Total interest expense$87 $99 $190 $(12)(12) %$(103)(54) %
Net interest income$1,124 $1,117 $1,160 $ %$(36)(3) %
Net interest margin, FTE2.72  %2.76  %2.88  %(4) bps(16) bps
Second quarter 2021vs.first quarter 2021
Net interest income of $1.1 billion increased 1% given interest-earning asset growth, higher day count and improved funding mix, partially offset by lower net interest margin.
Net interest margin of 2.72% decreased 4 basis points reflecting lower earning-asset yields, partly offset by improved funding mix and deposit pricing. Interest-bearing deposit costs are down 4 basis points to 16 basis points.

Second quarter 2021vs.second quarter 2020
Net interest income of $1.1 billion decreased 3% given lower net interest margin, partly offset by 2% growth in interest-earning assets.
Net interest margin of 2.72% decreased 16 basis points, primarily reflecting the impact of a lower rate environment, lower interest-earning asset yields and elevated cash balances given strong deposit flows, partially offset by improved funding mix and deposit pricing.

2

Citizens Financial Group, Inc.
Noninterest Income 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
$%$%
Mortgage banking fees$85 $165 $276 $(80)(48) %$(191)(69) %
Service charges and fees100 99 84 16 19 
Capital markets fees91 81 61 10 12 30 49 
Card fees64 55 48 16 16 33 
Trust and investment services fees60 58 45 15 33 
Letter of credit and loan fees38 38 31 — — 23 
Foreign exchange and interest rate products28 28 34 — — (6)(18)
Securities gains, net— — — — 
Other income(1)
16 15 100 
Noninterest income$485 $542 $590 $(57)(11) %$(105)(18) %
1) Includes bank-owned life insurance income and other miscellaneous income for all periods presented.
Second quarter 2021vs.first quarter 2021
Noninterest income of $485 million decreased $57 million, or 11%, from $542 million.
Mortgage banking fees decreased $80 million, reflecting a $54 million decline in production revenue on lower gain-on-sale margins, despite strong production volumes, given increased industry capacity and heightened competition, as well as an increase in agency fees. Results also reflect a $26 million net decline in servicing results given the swing in MSR hedge results ($25 million gain in first quarter to $14 million loss in second quarter), partially offset by a $13 million increase in operating results.
Record capital markets fees increased $10 million, reflecting higher loan syndication fees given strong client activity.
Card fees increased $9 million driven by the economic recovery as well as seasonality, with debit transactions and card spend now exceeding pre-pandemic levels.
Record trust and investment services fees increased $2 million, reflecting an increase in assets under management from strong inflows and higher equity market levels, as well as higher annuity sales.

Second quarter 2021vs.second quarter 2020
Noninterest income of $485 million decreased $105 million, or 18%, reflecting:
Mortgage banking fees, down $191 million, driven by lower gain-on-sale margins despite higher origination volumes.
Service charges and fees, up $16 million, reflecting partial recovery from COVID-19 impacts on overdraft fees.
Record capital market fees, up $30 million, driven by higher loan syndication and M&A advisory fees.
Card fees, up $16 million, given higher debit and credit card volumes given the economic recovery.
Record trust and investment services fees, up $15 million, reflecting an increase in assets under management from higher equity market levels and strong inflows, as well as higher annuity sales.
Letter of credit fees, up $7 million, reflecting higher commitment fees.
Foreign exchange and interest rate products revenue, down $6 million, reflecting lower client interest rate hedging activity partly offset by strong client foreign exchange and commodities hedging results.
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Citizens Financial Group, Inc.
Noninterest Expense 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
$%$%
Salaries and employee benefits$524 $548 $513 $(24)(4)%$11 %
Equipment and software155 152 142 13 
Outside services137 139 131 (2)(1)
Occupancy82 88 82 (6)(7)— — 
Other operating expense93 91 111 (18)(16)
Noninterest expense$991 $1,018 $979 $(27)(3)%$12 %
Notable items$11 $20 $19 $(9)(45)%$(8)(42)%
Underlying, as applicable
Salaries and employee benefits$524 $548 $509 $(24)(4)%$15 %
Equipment and software151 148 142 
Outside services133 132 119 14 12 
Occupancy79 79 79 — — — — 
Other operating expense93 91 111 (18)(16)
Underlying noninterest expense$980 $998 $960 $(18)(2)%$20 %
Second quarter 2021vs.first quarter 2021
Noninterest expense of $991 million declined 3%. On an Underlying basis, noninterest expense of $980 million decreased $18 million, or 2%, reflecting seasonally lower salaries and employee benefits, along with strong expense discipline.
Second quarter 2021vs.second quarter 2020
Noninterest expense of $991 million remains well-controlled. On an Underlying basis, noninterest expense of $980 million increased by $20 million, or 2%, reflecting higher outside services largely tied to growth initiatives and higher equipment and software expense driven by increased technology spend. Salaries and employee benefits increased, reflecting higher revenue-based compensation. These results were partially offset by a decrease in other operating expense.

Interest-earning assets 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
Period-end interest-earning assets$%$%
Investments$27,976 $28,138 $25,657 $(162)(1) %$2,319  %
Interest-bearing deposits in banks12,007 13,851 6,833 (1,844)(13)5,174 76 
Commercial loans and leases59,083 60,413 64,930 (1,330)(2)(5,847)(9)
Retail loans63,498 61,782 60,783 1,716 2,715 
Total loans and leases122,581 122,195 125,713 386 — (3,132)(2)
Loans held for sale, at fair value3,616 4,304 3,631 (688)(16)(15)— 
Other loans held for sale82 75 1,362 (1,280)(94)
Total loans and leases and loans held for sale126,279 126,574 130,706 (295)— (4,427)(3)
Total period-end interest-earning assets$166,262 $168,563 $163,196 $(2,301)(1) %$3,066  %
Average interest-earning assets
Investments$27,600 $27,034 $25,184 $566  %$2,416 10  %
Interest-bearing deposits in banks11,259 10,861 5,231 398 6,028 115 
Commercial loans and leases60,653 60,877 67,409 (224)— (6,756)(10)
Retail loans62,837 61,970 61,346 867 1,491 
Total loans and leases123,490 122,847 128,755 643 (5,265)(4)
Loans held for sale, at fair value3,751 3,254 2,710 497 15 1,041 38 
Other loans held for sale233 385 510 (152)(39)(277)(54)
Total loans and leases and loans held for sale127,474 126,486 131,975 988 (4,501)(3)
Total average interest-earning assets$166,333 $164,381 $162,390 $1,952  %$3,943  %
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Citizens Financial Group, Inc.
Second quarter 2021vs.first quarter 2021
Period-end interest-earning assets of $166.3 billion decreased $2.3 billion, or 1%, given a $1.8 billion decrease in cash held in interest-bearing deposits partially offset by an increase in loans and leases of $386 million. This loan growth was driven by growth in retail given strength in mortgage, auto and education, partially offset by net payoffs in commercial, including PPP.
Average interest-earning assets of $166.3 billion were up $2.0 billion, as elevated liquidity drove a $398 million increase in cash held in interest-bearing deposits and a $566 million increase in investments. Results also reflect a $988 million increase in total loans and loans held for sale driven by an $867 million increase in retail.
The average effective duration of the securities portfolio was 3.6 years compared with 4.1 years at March 31, 2021.
Second quarter 2021vs.second quarter 2020
Period-end interest-earning assets of $166.3 billion increased $3.1 billion, or 2%, as elevated liquidity drove a $5.2 billion increase in cash held in interest-bearing deposits, and a $2.3 billion increase in investments. This was partially offset by a $4.4 billion decrease in loans and loans held for sale primarily driven by commercial client repayments of pandemic-related line of credit balances and net payoffs, including PPP.
Average interest-earning assets of $166.3 billion increased $3.9 billion, or 2%, as elevated liquidity drove a $6.0 billion increase in cash held in interest-bearing deposits, and a $2.4 billion increase in investments. Loans and loans held for sale decreased $4.5 billion, or 3%, with a $6.8 billion decrease in commercial reflecting line of credit repayments, partly offset by a $1.2 billion increase in PPP loans. Retail loans increased $1.5 billion, or 2%, driven by growth in education, residential mortgage and auto, partially offset by planned run off of personal unsecured installment loans and a decrease in home equity. Loans held for sale increased $764 million reflecting mortgage originations.
The average effective duration of the securities portfolio of 3.6 years increased from 2.1 years at June 30, 2020.
    
Deposits 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
Period-end deposits$%$%
Demand deposits$47,480 $46,067 $40,545 $1,413  %$6,935 17  %
Checking with interest28,074 26,883 27,200 1,191 874 
Savings20,382 19,634 16,665 748 3,717 22 
Money market accounts48,150 51,074 44,965 (2,924)(6)3,185 
Term deposits6,550 7,691 14,243 (1,141)(15)(7,693)(54)
Total period-end deposits$150,636 $151,349 $143,618 $(713)—  %$7,018  %
Average deposits
Demand deposits$46,630 $43,814 $37,745 $2,816  %$8,885 24  %
Checking with interest27,278 26,116 26,312 1,162 966 
Savings20,077 18,611 15,883 1,466 4,194 26 
Money market accounts49,394 49,536 45,187 (142)— 4,207 
Term deposits6,970 8,572 16,470 (1,602)(19)(9,500)(58)
Total average deposits$150,349 $146,649 $141,597 $3,700  %$8,752  %
Second quarter 2021vs.first quarter 2021
Total period-end deposits of $150.6 billion decreased $713 million reflecting a decline in money market accounts and term deposits, partly offset by growth in demand deposits, checking with interest and savings.
Citizens Access® deposits were $4.9 billion at June 30, 2021, down from $5.3 billion at March 31, 2021, primarily due to rate reduction strategies that resulted in a decrease in term deposits.
Average deposits of $150.3 billion increased $3.7 billion, or 3%, as growth in demand deposits, savings and checking with
5

Citizens Financial Group, Inc.
interest was partially offset by a decrease in term deposits.
Second quarter 2021vs.second quarter 2020
Total period-end deposits of $150.6 billion increased $7.0 billion, or 5%, as a result of government stimulus and clients building liquidity given COVID-19 disruption. Growth in demand deposits, money market accounts and savings was partially offset by a decrease in term deposits.
Average deposits of $150.3 billion increased $8.8 billion, or 6%, reflecting an increase in demand deposits, money market accounts, savings and checking with interest, partially offset by a decrease in term deposits.

Borrowed Funds 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
Period-end borrowed funds$%$%
Short-term borrowed funds$62 $70 $255 $(8)(11) %$(193)(76) %
Long-term borrowed funds
FHLB advances18 19 (1)(5)12 200 
Senior debt5,357 6,714 7,519 (1,357)(20)(2,162)(29)
Subordinated debt and other debt1,582 1,583 1,677 (1)— (95)(6)
Total borrowed funds$7,019 $8,386 $9,457 $(1,367)(16) %$(2,438)(26) %
Average borrowed funds
Short-term borrowed funds$69 $150 $222 $(81)(54) %$(153)(69) %
Long-term borrowed funds
FHLB advances18 19 2,595 (1)(5)(2,577)(99)
Senior debt5,834 6,732 7,499 (898)(13)(1,665)(22)
Subordinated debt and other debt1,582 1,585 1,661 (3)— (79)(5)
Total average borrowed funds$7,503 $8,486 $11,977 $(983)(12) %$(4,474)(37) %
Second quarter 2021vs.first quarter 2021
Period-end borrowed funds decreased $1.4 billion, or 16%, and average borrowed funds decreased $983 million, or 12%, as elevated liquidity enabled the pay down of senior debt.
Second quarter 2021vs.second quarter 2020
Period-end borrowed funds declined $2.4 billion, or 26%, reflecting the pay down of senior debt and short-term borrowings.
Average borrowed funds declined $4.5 billion, or 37%, as strong customer deposit inflows allowed for significantly lower levels of FHLB advances and the pay down of senior debt and short-term borrowings.
Capital 2Q21 change from
($s and shares in millions, except per share data)2Q211Q212Q201Q212Q20
Period-end capital$%$%
Stockholders' equity$23,199 $22,653 $22,418 $546  %$781  %
Stockholders' common equity21,185 20,688 20,453 497 732 
Tangible common equity14,466 13,964 13,716 502 750 
Tangible book value per common share$33.95 $32.79 $32.13 $1.16 $1.82 
Common shares - at end of period426.1 425.9 426.8 0.2 — (0.7)— 
Common shares - average (diluted)427.6 427.9 427.6 (0.3)—  %— —  %
Common equity tier 1 capital ratio(1)
10.3 %10.1 %9.6 %
Total capital ratio(1)
13.5 13.4 13.1 
Tier 1 leverage ratio(1)
9.7 %9.5 %9.3 %
1) Current reporting-period regulatory capital ratios are preliminary.
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Citizens Financial Group, Inc.
Second quarter 2021
Our Basel III capital ratios continued to strengthen, with a CET1 capital ratio of 10.3% as of June 30, 2021 compared with 10.1% at March 31, 2021 and 9.6% at June 30, 2020. The acquisition of the HSBC deposits is expected to close in first quarter 2022 and have an approximate 24 basis point impact on CET1.
Total capital ratio of 13.5% compared with 13.4% at March 31, 2021 and 13.1% as of June 30, 2020. During the second quarter 2021, the company issued $300 million of Series G preferred stock that qualifies as additional tier 1 capital. On July 6, 2021, the company redeemed its $250 million of outstanding Series A preferred stock.
Tangible book value per common share of $33.95 increased 4% compared with first quarter 2021 and increased 6% from second quarter 2020.
Citizens paid $168 million in common dividends to shareholders during second quarter 2021. This compares with $262 million in total capital returned to shareholders through share repurchases and common dividends in first quarter 2021 and $168 million in common dividends in second quarter 2020.
Credit quality review 2Q21 change from
($s in millions)2Q211Q212Q201Q212Q20
$/bps%$/bps%
Nonaccrual loans and leases(1)
$779 $1,008 $990 $(229)(23) %$(211)(21) %
90+ days past due and accruing(2)
280 46 55 234 NM225 NM
Net charge-offs78 158 147 (80)(51)(69)(47)
Provision for credit losses(213)(140)464 (73)(52)(677)NM
Allowance for credit losses$2,081 $2,372 $2,527 $(291)(12) %(446)(18) %
Nonaccrual loans and leases to loans and leases0.64  %0.82  %0.79  %(18) bps(15) bps
Net charge-offs as a % of total loans and leases0.25 0.52 0.46 (27)(21)
Allowance for credit losses to loans and leases1.70 1.94 2.01 (24)(31)
Allowance for credit losses to loans and leases (ex. PPP)1.75 2.03 2.09 (28)(34)
Allowance for credit losses to nonaccrual loans and leases267.0  %235.4  %255.4  %3,156  bps1,159  bps
1) Loans fully or partially guaranteed by the FHA, VA and USDA are classified as accruing.
2) 90+ days past due and accruing includes $266 million, $20 million, and $13 million of loans fully or partially guaranteed by the FHA, VA, and USDA for
    June 30, 2021, March 31, 2021, and June 30, 2020, respectively.
Second quarter 2021vs.first quarter 2021
Nonaccrual loans of $779 million decreased $229 million, or 23%, from the first quarter 2021, reflecting a $116 million decrease in commercial given charge-offs, loan sale activity and repayments, and a $113 million decrease in retail.
The nonaccrual loans to total loans ratio of 0.64% is down from 0.82% at March 31, 2021.
Net charge-offs were 25 basis points of average loans and leases, down from 52 basis points.
Net charge-offs of $78 million decreased $80 million driven by commercial.
Credit provision benefit of $213 million was driven by macroeconomic improvement and strong credit performance across the retail and commercial loan portfolios. First quarter 2021 credit provision benefit was $140 million.
Allowance for credit losses ratio of 1.70%, or 1.75% before the impact of PPP loans, compares with 1.94% as of March 31, 2021, or 2.03% before the impact of PPP loans. The reduction reflects a reserve release of $291 million.
The allowance for credit losses to nonaccrual loans and leases ratio of 267% compares with 235% as of March 31, 2021.
Second quarter 2021vs.second quarter 2020
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Citizens Financial Group, Inc.
Nonaccrual loans decreased $211 million, or 21%, driven by a $240 million decrease in commercial given charge-offs, loan sale activity and repayments, partly offset by a $29 million increase in retail.
The nonaccrual loans to total loans ratio of 0.64% decreased from 0.79% at June 30, 2020.
Net charge-offs of $78 million decreased $69 million reflecting a $30 million decrease in commercial and a $39 million decrease in retail as consumers continue to benefit from government stimulus and strong mortgage and auto collateral values.
Net charge-offs of 25 basis points of average loans and leases compares with 46 basis points in second quarter 2020.
Credit provision benefit of $213 million compares with a $464 million provision in second quarter 2020, reflecting strong credit performance across the retail and commercial loan portfolios and improvement in the macroeconomic outlook.
Allowance for credit losses of $2.1 billion compares with $2.5 billion at June 30, 2020. Allowance for credit losses ratio of 1.70% as of June 30, 2021, or 1.75% before the impact of PPP loans, compares with 2.01% as of June 30, 2020, or 2.09% before the impact of PPP loans.
The allowance for credit losses to nonaccrual loans and leases ratio of 267% compares with 255% as of June 30, 2020.

8

Citizens Financial Group, Inc.
Earnings highlights:
Quarterly Trends
 2Q21 change from
($s in millions, except per share data)2Q211Q212Q201Q212Q20
Earnings$/bps%$/bps%
Net interest income$1,124 $1,117 $1,160 $1 %$(36)(3) %
Noninterest income485 542 590 (57)(11)(105)(18)
Total revenue1,609 1,659 1,750 (50)(3)(141)(8)
Noninterest expense991 1,018 979 (27)(3)12 1
Pre-provision profit618 641 771 (23)(4)(153)(20)
Provision for credit losses(213)(140)464 (73)(52)(677)NM
Net income648 611 253 37 6395 156
Preferred dividends32 23 28 3914
Net income available to common stockholders$616 $588 $225 $28 5 %$391 174 %
After-tax notable Items15 10 (7)(47)(2)(20)
Underlying net income$656 $626 $263 $30 5 %$393 149 %
Underlying net income available to common stockholders$624 $603 $235 $21 3 %$389 166 %
Average common shares outstanding
Basic (in millions)425.9 426.0 426.6 — (0.7)
Diluted (in millions)427.6 427.9 427.6 (0.3)— 
Diluted earnings per share$1.44 $1.37 $0.53 $0.07 5 %$0.91 172 %
Underlying diluted earnings per share$1.46 $1.41 $0.55 $0.05 4 %$0.91 165 %
Performance metrics
Net interest margin2.71 %2.75 %2.87 %(4) bps(16) bps
Net interest margin, FTE2.72 2.76 2.88 (4)(16)
Effective income tax rate22.0 21.8 17.7 20 427 
Efficiency ratio62 61 56 28 572 
Underlying efficiency ratio61 60 55 73 607 
Return on average common equity11.9 11.6 4.4 28 741 
Return on average tangible common equity17.5 17.2 6.6 33 1,088 
Underlying return on average tangible common equity17.7 17.6 6.9 15 1,084 
Return on average total assets1.41 1.36 0.57 84 
Underlying return on average total tangible assets1.48 %1.44 %0.61 % bps87  bps
Capital adequacy(1,2)
Common equity tier 1 capital ratio10.3 %10.1 %9.6 %
Total capital ratio13.5 13.4 13.1 
Tier 1 leverage ratio9.7 9.5 9.3 
Allowance for credit losses to loans and leases1.70 %1.94 %2.01 %(24) bps(31) bps
Asset quality(2)
Nonaccrual loans and leases to loans and leases0.64 %0.82 %0.79 %(18) bps(15) bps
Allowance for credit losses to nonaccrual loans and leases267 235 255 3,156 1,159 
Net charge-offs as a % of average loans and leases0.25 %0.52 %0.46 %(27) bps(21) 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.




9

Citizens Financial Group, Inc.
The following table provides information on Underlying results which exclude the impact of notable items.

Underlying results:

Quarterly Trends
 2Q21 change from
($s in millions, except per share data)2Q211Q212Q201Q212Q20
Net interest income$1,124 $1,117 $1,160  %(3) %
Noninterest income485 542 590 (11)(18)
Total revenue$1,609 $1,659 $1,750 (3) %(8) %
Noninterest expense991 1,018 979 (3)
Notable items11 20 19 (45)(42)
Underlying noninterest expense$980 $998 $960 (2) % %
Underlying pre-provision profit629 661 790 (5)(20)
Provision for credit losses(213)(140)464 (52)NM
Net income available to common stockholders616 588 225 174
Underlying net income available to common stockholders$624 $603 $235 %166 %
Performance metrics
Diluted EPS$1.44 $1.37 $0.53  %172  %
Underlying EPS$1.46 $1.41 $0.55  %165  %
Efficiency ratio62  %61  %56  %28  bps572  bps
Underlying efficiency ratio61 60 55 73 607 
Return on average tangible common equity17.5 17.2 6.6 33 1,088
Underlying return on average tangible common equity17.7  %17.6  %6.9  %15  bps1,084  bps
Operating leverage(0.5)%(9.4)%
Underlying operating leverage(1.2) %(10.2) %




















10

Citizens Financial Group, Inc.
Notable items:
First quarter and second quarter 2021, and second quarter 2020 results reflect notable items primarily related to TOP 6 transformational and revenue and efficiency initiatives as well as integration costs. These notable items have been excluded from reported results to better reflect Underlying operating results.



Notable items - integration costs2Q211Q212Q20
($s in millions, except per share data)Pre-taxAfter-taxPre-taxAfter-taxPre-taxAfter-tax
  Noninterest income$— $— $ $— $— $— 
Salaries & benefits$— $— $— $— $— $— 
Equipment and software$— — — — — — 
Outside services$(2)(1)— — (2)(1)
Occupancy$— — — — — — 
Other expense$— — — — — — 
   Noninterest expense$(2)$(1)$— $— $(2)$(1)
Total Integration Costs$(2)$(1)$— $— $(2)$(1)
Other notable items - primarily tax and TOP2Q211Q212Q20
($s in millions, except per share data)Pre-taxAfter-taxPre-taxAfter-taxPre-taxAfter-tax
Tax notable items$— $— $— $— $— $
Other notable items- TOP & other actions
Salaries & benefits— — — — (4)(4)
Equipment and software(4)(3)(4)(3)— — 
Outside services(2)(2)(7)(5)(10)(7)
Occupancy(3)(2)(9)(7)(3)(2)
Other expense— — — — — — 
   Noninterest expense$(9)$(7)$(20)$(15)$(17)$(13)
Total Other Notable Items$(9)$(7)$(20)$(15)$(17)$(9)
Total Notable Items$(11)$(8)$(20)$(15)$(19)$(10)
EPS Impact$(0.02)$(0.04)$(0.02)


11

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: Kristin Silberberg - 203.900.6854
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 2929135
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 20, 2021 through August 20, 2021. Please dial (866) 207-1041 and enter access code 1469569. 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 $185.1 billion in assets as of June 30, 2021. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center and the convenience of approximately 3,000 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.

12

Citizens Financial Group, Inc.

Non-GAAP Financial Measures and Reconciliations
Non-GAAP Financial Measures:
This document contains non-GAAP financial measures denoted as “Underlying” results, "excluding elevated cash", "excluding PPP loans”, as well as other results excluding the impact of certain items. 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.
13

Citizens Financial Group, Inc.

Non-GAAP financial measures and reconciliations
(in millions, except share, per-share and ratio data)
QUARTERLY TRENDS
2Q21 Change
2Q211Q212Q201Q212Q20
$%$%
Total revenue, Underlying:
Total revenue (GAAP)A$1,609 $1,659 $1,750 ($50)(3 %)($141)(8 %)
Less: Notable items— — — — — — — 
Total revenue, Underlying (non-GAAP)B$1,609 $1,659 $— $1,750 ($50)(3 %)($141)(8 %)
Noninterest expense, Underlying:
Noninterest expense (GAAP)C$991 $1,018 $979 ($27)(3 %)$12 %
Less: Notable items11 20 19 (9)(45)(8)(42)
Noninterest expense, Underlying (non-GAAP)D$980 $998 $960 ($18)(2 %)$20 %
Pre-provision profit:
Total revenue (GAAP)A$1,609 $1,659 $1,750 ($50)(3 %)($141)(8 %)
Less: Noninterest expense (GAAP)C991 1,018 979 (27)(3)12 
Pre-provision profit (GAAP)$618 $641 $771 ($23)(4 %)($153)(20 %)
Pre-provision profit, Underlying:
Total revenue, Underlying (non-GAAP)B$1,609 $1,659 $1,750 ($50)(3 %)($141)(8 %)
Less: Noninterest expense, Underlying (non-GAAP)D980 998 960 (18)(2)20 
Pre-provision profit, Underlying (non-GAAP)$629 $661 $790 ($32)(5 %)($161)(20 %)
Income before income tax expense, Underlying:
Income before income tax expense (GAAP)E$831 $781 $307 $50 %$524 171 %
Less: Expense before income tax benefit related to notable items(11)(20)(19)45 42 
Income before income tax expense, Underlying (non-GAAP)F$842 $801 $326 $41 %$516 158 %
Income tax expense, Underlying:
Income tax expense (GAAP)G$183 $170 $54 $13 %$129 239 %
Less: Income tax benefit related to notable items(3)(5)(9)40 67 
Income tax expense, Underlying (non-GAAP)H$186 $175 $63 $11 %$123 195 %
Net income, Underlying:
Net income (GAAP)I$648 $611 $253 $37 %$395 156 %
Add: Notable items, net of income tax benefit15 10 (7)(47)(2)(20)
Net income, Underlying (non-GAAP)J$656 $626 $263 $30 %$393 149 %
Net income available to common stockholders, Underlying:
Net income available to common stockholders (GAAP)K$616 $588 $225 $28 %$391 174 %
Add: Notable items, net of income tax benefit15 10 (7)(47)(2)(20)
Net income available to common stockholders, Underlying (non-GAAP)L$624 $603 $235 $21 %$389 166 %
14

Citizens Financial Group, Inc.
Non-GAAP financial measures and reconciliations (continued)
(in millions, except share, per-share and ratio data)
QUARTERLY TRENDS
2Q21 Change
2Q211Q212Q201Q212Q20
$/bps%$/bps%
Operating leverage:
Total revenue (GAAP)A$1,609 $1,659 $1,750 ($50)(2.96 %)($141)(8.00 %)
Less: Noninterest expense (GAAP)C991 1,018 979 (27)(2.51)12 1.42 
Operating leverage(0.45 %)(9.42 %)
Operating leverage, Underlying:
Total revenue, Underlying (non-GAAP)B$1,609 $1,659 $1,750 ($50)(2.96 %)($141)(8.00 %)
Less: Noninterest expense, Underlying (non-GAAP)D980 998 960 (18)(1.78)20 2.18 
Operating leverage, Underlying (non-GAAP)(1.18 %)(10.18 %)
Efficiency ratio and efficiency ratio, Underlying:
Efficiency ratio C/A61.63 %61.35 %55.91 %28  bps572  bps
Efficiency ratio, Underlying (non-GAAP)D/B60.92 60.19 54.85 73  bps607  bps
Effective income tax rate and effective income tax rate, Underlying:
Effective income tax rateG/E21.96 %21.76 %17.69 %20  bps427  bps
Effective income tax rate, Underlying (non-GAAP)H/F22.01 21.85 19.36 16  bps265  bps
Return on average common equity and return on average common equity, Underlying:
Average common equity (GAAP)M$20,833 $20,611 $20,446 $222 %$387 %
Return on average common equityK/M11.85 %11.57 %4.44 %28  bps741  bps
Return on average common equity, Underlying (non-GAAP)L/M12.02 11.85 4.63 17  bps739  bps
Return on average tangible common equity and return on average tangible common equity, Underlying:
Average common equity (GAAP)M$20,833 $20,611 $20,446 $222 %$387 %
Less: Average goodwill (GAAP)7,050 7,050 7,050 — — — — 
Less: Average other intangibles (GAAP)53 57 65 (4)(7)(12)(18)
Add: Average deferred tax liabilities related to goodwill (GAAP)
381 379 375 
Average tangible common equityN$14,111 $13,883 $13,706 $228 %$405 %
Return on average tangible common equity K/N17.50 %17.17 %6.62 %33  bps1,088  bps
Return on average tangible common equity, Underlying (non-GAAP)L/N17.74 17.59 6.90 15  bps1,084  bps
Return on average total assets and return on average total assets, Underlying:
Average total assets (GAAP)O$184,456 $182,569 $179,793 $1,887 %$4,663 %
Return on average total assetsI/O1.41 %1.36 %0.57 % bps84  bps
Return on average total assets, Underlying (non-GAAP)J/O1.43 1.39 0.59  bps84  bps
Return on average total tangible assets and return on average total tangible assets, Underlying:
Average total assets (GAAP)P$184,456 $182,569 $179,793 $1,887 %$4,663 %
Less: Average goodwill (GAAP)7,050 7,050 7,050 — — — — 
Less: Average other intangibles (GAAP)53 57 65 (4)(7)(12)(18)
Add: Average deferred tax liabilities related to goodwill (GAAP)381 379 375 
Average tangible assetsQ$177,734 $175,841 $173,053 $1,893 %$4,681 %
Return on average total tangible assets I/Q1.46 %1.41 %0.59 % bps87  bps
Return on average total tangible assets, Underlying (non-GAAP)J/Q1.48 1.44 0.61  bps87  bps
15

Citizens Financial Group, Inc.
Non-GAAP financial measures and reconciliations (continued)
(in millions, except share, per-share and ratio data)
QUARTERLY TRENDS
2Q21 Change
2Q211Q212Q201Q212Q20
$/bps%$/bps%
Tangible book value per common share:
Common shares - at period-end (GAAP)R426,083,143 425,930,159 426,824,594 152,984 — %(741,451)— %
Common stockholders' equity (GAAP)$21,185 $20,688 $20,453 $497 $732 
Less: Goodwill (GAAP)7,050 7,050 7,050 — — — — 
Less: Other intangible assets (GAAP)52 54 63 (2)(4)(11)(17)
Add: Deferred tax liabilities related to goodwill (GAAP)383 380 376 
Tangible common equityS$14,466 $13,964 $13,716 $502 %$750 %
Tangible book value per common shareS/R$33.95 $32.79 $32.13 $1.16 %$1.82 %
Net income per average common share - basic and diluted and net income per average common share - basic and diluted, Underlying: