Post on 06-Jun-2020
Fixed Income Investor Presentation September 2016
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Important Information and GAAP/Non‐GAAP Information
1
This document contains forward-looking statements within the Private Securities Litigation Reform Act of 1995. Any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “goals,” “targets,” “initiatives,” “potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management, and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events. We caution you, therefore, against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. While there is no assurance that any list of risks and uncertainties or risk factors is complete, important factors that could cause actual results to differ materially from those in the forward-looking statements include the following, without limitation:
negative economic conditions that adversely affect the general economy, housing prices, the job market, consumer confidence and spending habits which may affect, among other things, the level of nonperforming assets, charge-offs and provision expense;
the rate of growth in the economy and employment levels, as well as general business and economic conditions; our ability to implement our strategic plan, including the cost savings and efficiency components, and achieve our indicative performance targets; our ability to remedy regulatory deficiencies and meet supervisory requirements and expectations; liabilities and business restrictions resulting from litigation and regulatory investigations; our capital and liquidity requirements (including under regulatory capital standards, such as the Basel III capital standards) and our ability to generate capital internally or raise capital on favorable terms; the effect of the current low interest rate environment or changes in interest rates on our net interest income, net interest margin and our mortgage originations, mortgage servicing rights and mortgages held for sale; changes in interest rates and market liquidity, as well as the magnitude of such changes, which may reduce interest margins, impact funding sources and affect the ability to originate and distribute financial products in
the primary and secondary markets; the effect of changes in the level of checking or savings account deposits on our funding costs and net interest margin; financial services reform and other current, pending or future legislation or regulation that could have a negative effect on our revenue and businesses, including the Dodd-Frank Act and other legislation and regulation
relating to bank products and services; a failure in or breach of our operational or security systems or infrastructure, or those of our third party vendors or other service providers, including as a result of cyber attacks; and management’s ability to identify and manage these and other risks.
In addition to the above factors, we also caution that the amount and timing of any future common stock dividends or share repurchases will depend on our financial condition, earnings, cash needs, regulatory constraints, capital requirements (including requirements of our subsidiaries), and any other factors that our board of directors deems relevant in making such a determination. Therefore, there can be no assurance that we will pay any dividends to holders of our common stock, or as to the amount of any such dividends. More information about factors that could cause actual results to differ materially from those described in the forward-looking statements can be found under “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2015, filed with the United States Securities and Exchange Commission on February 26, 2016. Note: Percentage changes, per share amounts, and ratios presented in this document are calculated using whole dollars. Non‐GAAP Financial Measures This document contains non-GAAP financial measures. The Appendix presents reconciliations of certain non-GAAP measures. These reconciliations exclude restructuring charges and/or special items, which are included, where applicable, in the financial results presented in accordance with GAAP. Restructuring charges and special items include expenses related to our efforts to improve processes and enhance efficiencies, as well as rebranding, separation from RBS and regulatory expenses. The non-GAAP measures include "noninterest income", "noninterest income adjusted for card reward accounting change", "total revenue", "total revenue adjusted for card reward accounting change", "noninterest expense", "noninterest expense adjusted for card reward accounting change", "net income", "net income available to common stockholders", "core average deposits" and "core annualized net charge-off rate". In addition, we present computations for "return on average tangible common equity", "return on average total assets", "efficiency ratio", "operating leverage" and "pro forma Basel III fully phased-in common equity tier 1 capital" as part of our non-GAAP measures. We believe these non-GAAP measures provide useful information to investors because these are among the measures used by our management team to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe restructuring charges and special items in any period do not reflect the operational performance of the business in that period and, accordingly, it is useful to consider these line items with and without restructuring charges and special items. We believe this presentation also increases comparability of period-to-period results. We also consider pro forma capital ratios defined by banking regulators but not effective at each period end to be non-GAAP financial measures. Since analysts and banking regulators may assess our capital adequacy using these pro forma ratios, we believe they are useful to provide investors the ability to assess our capital adequacy on the same basis. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by other companies. We caution investors not to place undue reliance on such non-GAAP measures, but instead to consider them with the most directly comparable GAAP measure. Non-GAAP financial measures have limitations as analytical tools, and should not be considered in isolation, or as a substitute for our results as reported under GAAP.
Review: Corporate Reporting and Legal
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Overview
2
Company overview and strategy
Improving financial performance
Capital/funding and liquidity
Risk management
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Company overview and strategy
3
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13th largest U.S. retail bank holding company with attractive demographics in core markets
Attractive business mix with growing and profitable commercial business complementing strong consumer business
Client-centric model focused on deepening customer relationships
Attractive, client-centric franchise
with scale
Intense focus on strategic priorities driving attractive growth with improving asset mix and returns
Committed to driving enhanced efficiency and effectiveness
Prudently optimizing capital structure and risk profile to help drive improved risk-adjusted returns
Peer-leading capital ratios
Stable, low-cost deposit base
Solid asset quality through credit cycles
Strong, clean balance sheet
supports growth plans
Expected path to improved
profitability
Key investment highlights
4
Review: Strategy, Legal
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Average industry experience of 28 years
Leadership Team Member Title
Bruce Van Saun Chairman and Chief Executive Officer
Eric Aboaf Chief Financial Officer
Mary Ellen Baker EVP and Head of Business Services
Brad Conner Vice Chairman and Head of Consumer Banking
Stephen Gannon EVP, General Counsel and Chief Legal Officer
Malcolm Griggs EVP and Chief Risk Officer
Beth Johnson EVP, Chief Marketing Officer and Head of Consumer Strategy
Susan LaMonica EVP and Chief Human Resource Officer
Don McCree Vice Chairman and Head of Commercial Banking
Robert Nelson EVP and Chief Compliance Officer
Brian O’Connell EVP and Regional Director Technology Services
Board Member Committees
Bruce Van Saun Chairman and Chief Executive Officer
Arthur F. Ryan
Lead Director; Chair of Compensation and
Human Resources Committee; Member of
Nominating and Corporate Governance
Committee
Mark Casady Member of Risk Committee
Christine Cumming Member of Risk Committee
Anthony Di Iorio Member of Audit Committee; Nominating and
Corporate Governance Committee
William P. Hankowsky Member of Audit Committee; Compensation
and Human Resources Committee
Howard W. Hanna III Member of Audit Committee; Nominating and
Corporate Governance Committee
Lee Higdon Member of Audit Committee; Compensation
and Human Resources Committee
Charles J. (“Bud”) Koch Chair of Risk Committee; Member of Audit
Committee
Shivan S. Subramaniam
Chair of Nominating and Corporate
Governance Committee; Member of Risk
Committee
Wendy A. Watson
Chair of Audit Committee;
Member of Risk Committee; Compensation
and Human Resources Committee
Marita Zuraitis Member of Risk Committee
5
We are led by a strong and experienced board & leadership team
Green highlighting denotes new additions since January 2015.
Since January 2015, have attracted or promoted from within more than 28% of our Executive Leadership Group (top 137)
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Dimension Rank(2)
Assets: $145.2 billion #13
Loans: $103.6 billion #11
Deposits: $106.3 billion #12
Branches: 1,200 #12
ATM network: 3,200 #8
Lead/joint lead bookrunner
#9(3)
Mortgage: $13.9 billion #15
nationally(6)
Student: $5.5 billion Top 4 rank
nationally(4)
Deposits: $106.3 billion Top 5 rank: 9/10 markets(1)
HELOC: $14.7 billion Top 5 rank: 9/9 markets(5)
Source: SNL Financial. Data as of 6/30/2016, unless otherwise noted. 1) Updated annually, as of 6/30/2015, excludes non-retail branches, and banks with limited retail operations. 2) Ranking based on 6/30/2016 data, unless otherwise noted; excludes non-retail depository institutions, includes U.S. subsidiaries of foreign banks. 3) Thomson Reuters LPC, loan syndications 2Q16 ranking based on number of deals for Overall Middle Market (defined as Borrower Revenues < $500MM and Deal Size < $500MM). 4) CFG estimate, based on published company reports, where available, private student loan origination data as of 3/31/2016. 5) According to Equifax; origination volume as of 2Q16. 6) According to IMF Retail Originators Bank Only ranking; reflects CFG organic origination volume as of 2Q16.
Leading deposit market share of 10.7% in top 10 MSAs(1)
– #2 deposit market share in New England
Relatively diverse economies/affluent demographics
Serve 5 million+ individuals, institutions and companies
~17,800 colleagues
Retail presence in 11 states
Top 5 deposit market share in 9 of 10 largest MSAs(1)
Buffalo, NY: #5 Albany, NY: #2
Pittsburgh, PA: #2 Cleveland, OH: #3
Manchester, NH: #1
Boston, MA: #2
Rochester, NY: #4
Philadelphia, PA: #4
Detroit, MI: #8
Providence, RI: #1
Solid franchise with leading positions in attractive markets
6
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54%
46%
Commercial
Consumer
Corporate Banking Commercial Real Estate Franchise Finance Asset Finance PE/Sponsor Finance Healthcare/Technology/
Oil & Gas/Not-for-Profit verticals
Capital Markets Global Markets Treasury Solutions Commercial Deposit Services
Retail Deposit Services Mobile/Online Banking Credit/Debit Card Wealth Management Home Equity loans/lines Mortgage Auto
Education Finance Business Banking
Consumer Commercial
Deep client relationships
+ Extensive product set
Robust product offerings and balanced business mix
64%
36% Commercial
Consumer
Targeting
50/50 Mix
Period-end loans and leases(1)
$101 billion 2Q16 $74 billion 2009
Drive cross sell and wallet share
1) Reflects loans and leases and loans and leases held for sale in our operating segments (Consumer and Commercial Banking). Excludes loans held in Other/Non-core loans. Non-core assets are primarily loans inconsistent with our strategic goals, generally as a result of geographic location, industry, product type or risk level. 7
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85% 84%
CFG PeerAverage
Well capitalized with a common equity tier 1 capital ratio of 11.5%(1) on a fully phased-in Basel III basis
Strong asset quality performance with core net charge-offs of 20 bps(1,2) in 2Q16
Robust deposit franchise with $86.5 billion of core deposits(3), or 83%(1) of average total deposits, and total 2Q16 deposit costs of 24 bps with strong liquidity and fully compliant liquidity coverage ratio
Source: SNL Financial and Company filings. Peers include CMA, BBT, FITB, KEY, PNC, RF, STI and USB. Due to recent acquisitions, BBT excluded from 1Q16-2Q16 and MTB excluded from 4Q15-2Q16 peer average. 1) Non-GAAP item. See Appendix for a reconciliation of non-GAAP items. 2) Net charge-off percentages are quarter-to-date on an annualized basis. 3) Excludes term and brokered deposits.
2Q16 CET1 ratio
(Basel III transitional basis common equity tier 1 ratio)
2Q16 total deposits/ total liabilities
11.5% 10.4%
CFG PeerAverage
Strong, clean balance sheet funded with low-cost deposits
8
2Q16 net charge-offs/ average loans and leases(2)
Core Non-Core
0.20%
0.35%
0.25%
CFG PeerAverage
(1)
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11.5% 11.0% 9.9% 10.6% 10.0% 11.0% 11.1% 10.4% 9.5% 10.5% 9.8%
14.9% 14.7% 14.7% 14.3% 13.9% 13.9% 13.6% 13.6% 13.4% 12.7% 12.7%
CFG MTB FITB PNC BBT RF KEY Peeravg
USB CMA STI
Publicly stated CET1 targets(3)
0.2% 1.3% 1.1% 1.3% 1.7% 0.8% 0.3% 0.8% 1.6% 0.0% 0.7%
3.2% 2.4% 3.6% 2.4% 2.2% 2.2% 2.2% 2.4% 2.2% 2.3% 2.1%
9
Plans to adjust capital structure but remain above peers
Common equity tier 1 Preferred equity Additional tier 1 Tier 2
Total additional tier 1 ratio
Tier 2 ratio
(4)
(5)
Relatively high CET1 ratio of 11.5% versus 10.4% for peers, providing an additional capital cushion
─ Though moving toward a more efficient capital structure, CFG targets (~11% CET1) remain well above peers
Tier 2 capital of 3.2% is ~80 bps above peer average
CFG ~11%
BBT 9.0-10.0%
FITB 9.0-9.5%
KEY <9.5%
MTB <10.0%
PNC 8.0-9.0%
RF ~9.5%
STI 8.0-9.0%
USB 8.0%
Peer Avg ~9.1%
Source: SNL Financial 1) Based on regulatory data. CFG Basel III transitional basis, Basel III ratios assume that certain definitions impacting qualifying Basel III capital will phase in through 2019.
Ratios reflect the required U.S. Standardized methodology for calculating RWAs, effective January 1, 2015. 2) Due to recent acquisitions, BBT and MTB excluded from 2Q16 peer average. 3) Capital targets from company earnings calls, company disclosures and CFG estimates. As of 6/30/16. 4) Total additional tier 1 capital includes preferred stock and qualifying minority interests and excludes tier 1 common equity. 5) Additional tier 1 capital in select peer instances comprises instruments other than preferred stock.
2Q16 total capital(1)
(2)
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Improving financial performance
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On track to deliver $95-$100 million of pre-tax benefit from TOP II program by end of 2016
TOP III program targeting $90-$110 million pre-tax benefit by end of 2017
Continue prudent and high- return technology investment
Continued CCAR progress
Regulatory issue remediation
Improved corporate governance
Enhanced risk framework
New vision, Credo & strategy
Investing in leadership and colleague development
Continue to uptier talent with improved acquisition strategies
Reenergize Household growth
Reposition Auto
Grow Education Finance/ Installment loans
Expand Business Banking
Expand Mortgage
Expand Wealth
Build out Mid-corporate & Specialty verticals
Continued development of Capital & Global Markets
Build out Treasury Solutions
Grow Franchise Finance
Grow core Commercial Banking - e.g. CRE, Middle Market
Target 6-8% average loan growth
Target Basel III common equity tier 1 ratio of 11.2-11.5% by years-end 2016
Improved Consumer Bank
Continued Commercial Banking Momentum
Balance Sheet Growth/Optimization
Capital-Mix Normalization
Enhanced Efficiency & Infrastructure
Embedded Robust Risk/Regulatory Framework
High-Performing, Customer-Centric Culture
11
We have developed specific initiatives to support our strategy
(1)
(1)
1) “Tapping our Potential” Phase II revenue and efficiency initiatives launched mid 2015 and Phase III launched mid 2016.
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Initiative 2Q16 Status
Commentary
Reenergize household growth Retail checking HHs up QoQ and YoY with new checking; HH first-year attrition improvements. Deposits up 3% and services charges up 5% YoY.
Expand mortgage sales force Application and origination volumes up 20% and 42% QoQ with improved throughput as operational issues have been addressed. Achieved highest pipeline roll rate since TRID / platform implementation. LOs up 16 QoQ to 451.
Grow Auto Selectively raising price to moderate origination volumes; organic originations yields up 33 bps YoY.
Grow Student/Installment Sustained momentum in Student with total loan balances up 91% from 2Q15. Continued steady growth in iPhone upgrade program (iUp).
Expand Business Banking Increasing focus on deposits, cash management and other fee income streams driving deposits up 4% and deposit fees up 7% compared to 2Q15.
Expand Wealth sales force Financial consultants up 10% YoY to 339. Enhancing and expanding product set and transitioning to more balanced fee-based model.
Build out Mid-corp & verticals Loan growth of more than 20% YoY; improving capital markets cross sell with particular strength in fixed income.
Continue development of Capital and Global Markets activities
Fee income up 15% YoY driven by improved deal volume and bond market conditions. Mid-May commencement of broker dealer provided incremental fee opportunities. Enhanced FX and interest rate platform.
Build out Treasury Solutions Fees up 16% vs. 2Q15 led by strength in core cash management services, TOP II pricing initiative and commercial card.
Grow Franchise Finance Strong growth with balances up 19% YoY. Continue expansion in well-established brands of quick-service and fast-casual franchises.
Expand Middle Market Portfolio relatively stable compared to 1Q16. Deposits up ~$750 million, or 12% and fee income up 16% versus prior-year quarter.
Grow CRE Continued to deepen client penetration with top developers in core geographies. CRE loans up 6% QoQ and 20% YoY to $9.2 billion, but moderating growth in a number of select areas such as multi-family in D.C. metro.
Reposition Asset Finance Driving increased penetration with Middle Market customer base, helping to offset reductions in RBS referral business. Initiatives targeting transportation, construction and renewable sectors driving higher margins.
Balance Sheet Optimization Continued execution of balance sheet strategies, including loan pricing and mix. Cost of deposits remained flat from 1Q16 at 24 bps. $310 million TDR transaction executed in July.
TOP II TOP II program is well underway and remains on track to deliver $95-$100 million of P&L benefit in 2016.
TOP III TOP III program has been launched with heavier emphasis on efficiency initiatives. Targeting 2017 run-rate benefit of $90-$110 million.
Summary of progress on strategic initiatives C
on
sum
er
Co
mm
erci
al
CFG
12
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Taking shape – emphasis on expenses Targeted run-rate benefit of
$90-110 million by end of 2017
Have developed continuous improvement mindset: TOP Programs
13
TOP I TOP II TOP III
Expenses
Salaries and benefits: Market alignment of benefits, organizational redesign and reduction in FTEs
Occupancy: Branch optimization, surplus office exit
Other: Expand technology outsourcing model, vendor consolidation, IT application consolidation, strengthened sourcing, travel and A/V and enhance loss collection
Revenue
Revenue enhancements:
─ Consumer distribution channel effectiveness
─ Commercial and Consumer cross sell
Pricing: Improve customer pricing methodology to better align with competitive landscape
Expense
Efficiency: Operations transformation and vendor management
Launched first half 2014 Achieved $200 million annual cost
saves by end of 2015
Launched mid 2015 On track to deliver $95-100 million
annual pre-tax benefit by end of 2016
Tapping Our Potential (TOP) programs driving revenue growth and expense efficiencies
~$120 million
~$20 million
~$60 million
$20-25 million
$30-40 million
$40-50 million
Revenue
Revenue enhancements:
─ Consumer unsecured lending product
─ Commercial attrition management
Expense
Efficiency:
─ Consumer non-revenue staff reduction
─ Commercial loan process streamlining
─ Further simplify back office areas
Tax
Initiatives to align tax rate to peer levels
$51-60 million
$22-30 million
$17-20 million
*Pre-tax equivalent benefit.
*
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9.9%
4.1%
6.5%
2.4%
6.8%
3.2%
A scaled platform well-positioned to drive value
Continuing to drive balance sheet and revenue momentum in 2016
Growing revenues faster (Revenue growth(1,2))
14
2Q16 vs. 2Q15
475 bps above peers
Source: SNL Financial and Company filings. Peers include CMA, FITB, KEY, PNC, RF, STI and USB. Due to recent acquisitions, BBT and MTB excluded from the peer average. 1) Peer results adjusted for unusual or special revenue, expense and acquisition items. 2) Non-GAAP item. Card reward accounting change impact adjusts 2Q15 noninterest income and noninterest expense results by $7 million. 3) Peer data as of 2Q16 10-Q filing. Peer estimates based on public disclosures and utilizes 200 basis point gradual increase above 12-month forward curve except PNC,
which is based on a 100 basis point gradual increase and STI, which is based on 200 basis point shock. PNC and STI excluded from peer median.
7.1%
Fee income growth (Noninterest income growth(1,2))
51 bps above peers
CFG results Peer average
CFG excluding the impact of the card reward accounting change (2)
(1) Peer median
Asset-sensitive balance sheet (200 bps gradual increase over forward curve(3))
Peer data as of most recent 10-Q filing
Higher NIM expansion (Net interest margin change)
12 bps 12 bps
above peers
Strong loan growth (Average total loan growth)
Robust NII growth (Net interest income growth)
573 bps above peers
7.4%
4.1%
CFG Peer average
Flat
0.6% 0.1%
-1.4%
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13.0%
1.6%
Well-controlled expenses (Adjusted noninterest expense(1,2) change)
With continued focus on expense control and improving returns 2Q16 vs. 2Q15
15
232 bps higher than
peers
4.2%
CFG Adjusted results Peer average
CFG excluding the impact of the card reward accounting change (2)
Efficiency improvement (Adjusted efficiency ratio(1,3) change)
Strong operating leverage (YoY Adjusted Operating Leverage(1,3))
278 bps better than
peers
325 bps
47 bps
(34) bps
165 bps better than
peers
Improving ROA as assets grow (Adjusted return on average total assets(1) change)
Return on equity (Adjusted return on average
tangible common equity(1) change)
63 bps
Accelerating profitability (Adjusted net income available to common stockholders(1) change)
5 bps
1,140 bps above peers
(3) bps
8 bps above peers
(55) bps
118 bps above peers
(199) bps
3.2% 1.9%
CFG Peer average
(1)
Source: SNL Financial and Company filings. Peers include CMA, FITB, KEY, PNC, RF, STI and USB. Due to recent acquisitions, BBT and MTB excluded from the peer average. 1) Non-GAAP item. 2Q15 Adjusted results exclude $40 million pre-tax net restructuring charges and special items associated with efficiency and effectiveness programs and separation from RBS.
See important information on use of non-GAAP items in the Appendix. Peer results adjusted for similar unusual or special revenue, expense and acquisition items. 2) Non-GAAP item. Card reward accounting change impact adjusts 2Q15 noninterest income and noninterest expense results by $7 million. 3) If adjusted for the card reward accounting change, operating leverage is 297 basis points; the efficiency ratio is (184) basis points.
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CFG net interest margin improved in 2H15, sustain in 2016
16
CFG Peer average
Source: SNL Financial and Company filings. Peers include CMA, FITB, KEY, PNC, RF, STI and USB. Due to recent acquisitions, BBT and MTB excluded from 2Q15-2Q16 peer average.
2 bps better than peers
10 bps better than peers
Focusing on optimizing asset growth and minimizing cost of deposits
12 bps better than peers
0.24% 0.25% 0.24% 0.24% 0.24%
0.14% 0.14% 0.14% 0.15% 0.16%
2Q15 3Q15 4Q15 1Q16 2Q16
Opportunity to minimize deposit costs (Total deposit-costs change)
Improving trend
2.72% 2.76% 2.77% 2.86% 2.84%
2.88% 2.86% 2.87% 2.94% 2.88%
2Q15 3Q15 4Q15 1Q16 2Q16
Lower net interest margin compression
Improving trend
3.08% 3.13% 3.15% 3.23% 3.22%
3.19% 3.18% 3.18%
3.28% 3.23%
2Q15 3Q15 4Q15 1Q16 2Q16
Lower yield compression (Earning-asset yield)
Improving trend
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Loan yield and deposit-cost initiatives
17
Evaluating and refining targeted growth opportunities to drive risk-adjusted returns
Deposit-gathering strategies Loan portfolio mix strategies
Investing to drive growth in higher-return categories such as student, other retail including iPhone upgrade loans and core home equity
Reducing capital allocation to lower-return categories such as auto, where we slowed growth in 2H15
Continuing momentum in mortgage and credit card
Improving advertising strategies through analytics with a shift to higher-return direct mail
Shifted incentives to emphasize checking account growth
Refined balance minimums for highest-value checking product
Launched Mass Affluent relationship-checking product
Increasing use of pricing analytics and rate-sensitive segmentation strategies
Co
nsu
mer
Ban
kin
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om
mer
cial
Ban
kin
g
Targeting select deposit opportunities
─ Key vendors, low share-of-wallet clients
─ Deposit-rich industries, including Healthcare, Technology, and Professional Services
Reducing attrition by increasing focus on ‘at-risk’ clients
Expanding/improving penetration with key products, including card services, evergreen and escrow
Leveraging business development team to drive focused calling efforts on specific deposit-growth initiative areas
Improving/leveraging lead-bank status in higher-return areas such as Middle Market, Industry Verticals, Franchise Finance
Continuing to drive benefit from loan pricing initiatives
TOP II
Capital Allocation Committee
Pricing Calculator
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11.0%
8.5%
6.9% 6.8% 6.2%
3.2% 3.1% 2.9% 2.2% 2.1%
CMA MTB RF CFG PNC BBT FITB USB KEY STI
6.8% 7.1% 6.1%
6.9% 6.8%
2.8% 2.7% 2.7% 2.8% 3.2%
2Q15 3Q15 4Q15 1Q16 2Q16
CFG Peer median
We remain positioned for rising rates…
18
Net interest income poised to benefit from rising rates
─ ~65-70% of asset sensitivity is centered around the short end of the yield curve
─ ~85% of the commercial loan portfolio and ~47% of home lending portfolio is floating rate
─ Fixed-rate assets amortize more quickly than the various sources of fixed-rate funding
─ Assume interest-bearing deposit betas in the high 50% range through a tightening cycle
─ ~5 percentage points higher than the industry experience in prior rate cycle
…but also see plenty of opportunity to further enhance performance by executing well on our initiatives
Interest rate sensitivity trend
Note: Peer data from SNL as of 2Q16. Peer banks include BBT, CMA, FITB, KEY, MTB, PNC, RF, STI and USB. Peer estimates based on the public disclosures as of the most recent quarter available and utilizes a 200 basis point gradual increase above 12-month forward curve except PNC, which is based on a 100 basis point gradual increase and STI, which is based on a 200 basis point shock. PNC and STI excluded from peer median.
Interest rate sensitivity ranking (200 bps gradual increase)
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Capital/funding and liquidity
19
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11.8% 11.8% 11.7% 11.6% 11.5%
10.2% 10.2% 10.3% 10.3% 10.4%
2Q15 3Q15 4Q15 1Q16 2Q16
CFG Peer average
15.3% 15.4% 15.3% 15.1% 14.9%
13.6% 13.6% 13.6% 13.5% 13.6%
2Q15 3Q15 4Q15 1Q16 2Q16
CFG Peer average
Stronger capital than peers
20
Increased quarterly dividends in 2Q16 by 20%
In 2015, paid $221 million in dividends and repurchased $500 million in common stock
─ Dividend payout ratio of 26%
─ Total common payout ratio of 85%
2016 CCAR plan reflects continued commitment toward prudent return of capital with up to $690 million in share repurchases; ability to increase dividend an additional 17% in 2017
Tactical priorities
─ Payout-composition objectives
Target 25-30% dividend payout
Buyback attractive given low
price-to-tangible book multiple
─ Limit preferred issuance until ROTCE* improves
─ Executed planned repurchase of $125 million of sub debt in March 2016 and $500 million of sub debt from RBS in July 2016; issued $350 million in senior unsecured notes in July 2016
Common equity tier 1 ratio
Total capital ratio
116 bps above peers
130 bps above peers
*ROTCE is a non-GAAP item. Source: SNL Financial and Regulatory data. Capital targets based on peer-bank earnings calls and disclosures. Peers include BBT, CMA, BBT, FITB, KEY, PNC, RF, STI and USB; due to recent acquisitions, BBT excluded from 1Q16-2Q16 and MTB excluded from 4Q15-2Q16 peer average.
Should we round?
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
2016 DFAST minimum stressed capital levels substantially above peers
21 Source: Dodd-Frank Act Stress Test 2016: Supervisory Stress Test Methodology and Results 1) Peers include BBT, CMA, FITB, KEY, PNC, RF, STI and USB; due to recent acquisitions, MTB excluded from 4Q15 peer average.
Severely Adverse Scenario
4Q15 Common equity tier 1 ratio
4Q15 Tier 1 capital ratio 4Q15 Tier 1 leverage ratio
151 bps above peers
4Q15 Total capital ratio
projected minimum
projected minimum
projected minimum
86 bps above peers
195 bps above peers
68 bps above peers
(1) (1)
(1) (1)
15.3%
13.6%
CFG Peer Average
projected minimum
7.3%
8.8%
10.5% 10.0%
CFG Peer Average
7.1% 7.8%
12.0% 11.3%
CFG Peer Average
8.1% 9.0%
11.7%
10.3%
CFG Peer Average
12.3%
10.4%
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
7%
31%
10%14%
11%
7%
20%
49%
38%
13%
2Q16 change from
$s in billions 2Q16 1Q16 2Q15 1Q16 2Q15
$ % $ %
Investments and interest bearing
deposits 26.0$ 25.5$ 27.1$ 0.5$ 2 % (1.1)$ (4) %
Total commercial loans 49.1 47.0 44.7 2.1 4 4.4 10
Total retail loans 53.5 53.2 50.9 0.3 1 2.6 5
Total loans and leases 102.7 100.3 95.6 2.4 2 7.1 7
Loans held for sale 0.8 0.4 0.5 0.5 128 0.4 78
Total interest-earning assets 129.5 126.2 123.2 3.3 3 6.3 5
Total noninterest-earning assets 12.7 12.6 12.3 0.1 1 0.4 3
Total assets 142.2$ 138.8$ 135.5$ 3.4$ 2 6.7$ 5
Low-cost core deposits(1) 55.2 53.6 51.1 1.7 3 4.2 8
Money market deposits 36.2 36.2 34.9 — — 1.3 4
Term deposits 12.6 12.2 12.6 0.4 3 — —
Total deposits 104.0$ 102.0$ 98.5$ 2.0$ 2 5.4$ 6
Total borrowed funds 15.0 13.9 14.8 1.2 8 0.3 2
Total liabilities 122.2$ 119.0$ 115.9$ 3.2$ 3 6.3$ 5
Total stockholders' equity 20.0 19.8 19.6 0.2 1 0.4 2
Total liabilities and equity 142.2$ 138.8$ 135.5$ 3.4$ 2 % 6.7$ 5 %
Consolidated average balance sheet
Linked quarter:
Total earning assets up $3.3 billion, or 3%, with loan growth of $2.4 billion, or 2%
─ Commercial loans up $2.1 billion, driven by strong growth in Mid-corporate and Industry Verticals, Commercial Real Estate, Corporate Finance and Franchise Finance
─ Retail loans up $324 million, driven by Education Finance
Total deposits increased $2.0 billion on strength in low-cost core deposits
Prior-year quarter:
Total earning assets up $6.3 billion, or 5%
─ Commercial loans up 10% driven by strength in CRE, Mid-corporate and Industry Verticals, Corporate Finance and Franchise Finance
─ Retail loans up 5%, driven by growth in Education Finance, Home Mortgage and Auto Finance
Total deposits up $5.4 billion, or 6%, reflecting strength in low-cost core deposits
Borrowed funds increased $266 million
─ Reflects growth in long-term senior debt and long-term FHLB borrowings, which replaced short-term FHLB borrowings and repos, as we continue to align our funding structure with peers
22
Highlights
1) Low-cost core deposits include demand, checking with interest and regular savings.
$129.5 billion Interest-earning assets
$119.0 billion Deposits/borrowed funds
Total Retail 42%
Total Commercial
38%
CRE Other
Commercial
Residential mortgage Total home
equity
Automobile
Other Retail
Investments and interest-bearing
deposits
Retail / Personal
Commercial/ Municipal/ Wholesale
Borrowed funds
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
5% 4% 2%
45% 44%
$11.2 $10.6
$6.6 $7.0
$0.6 $0.5
$4.3 $3.9
$1.3 $1.1 $0.9
$0.9
$25.0 $24.0
2Q15 2Q16
90% U.S. Agency MBS
4% AAA-rated non-agency
18% of total earning assets, in line with peers
Primary goal is to provide a source of high-quality liquid assets
─ 47% are Level 1 High-Quality Liquid Assets
qualifying
─ 46% are Level 2A High-Quality Liquid
Assets qualifying
Secondary objective is to optimize for yield
Average effective duration of the fixed income securities portfolio is 2.4 years
Average life of fixed income securities portfolio is 3.7 years, with minimal credit risk
High-quality investment portfolio $s in billions
23
Highlights Yield Yield
2.63%
Total AFS
Total HTM
U.S. Government Guaranteed
Non-Investment Grade
Non-Agency AAA FHLB, Federal Reserve Stock
“GSE” Fannie Mae and
Freddie Mac
Investment portfolio
4.29% 3.83% 2.46% 5.03%
2.33%
2.47%
2.33% 5.39% 2.18%
5.16%
1.87%
2.31%
2.20%
Investment portfolio ratings distribution
Fed agency and other stock Private label HTM GNMA securities HTM Private label AFS US government guaranteed AFS US agency AFS
Note: Data based on book value as of 2Q16.
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
26%
18%39%
10%
7%18%
16%
35%
30%
1%
1) Core excludes term and wholesale deposits. Non-GAAP item. See Appendix for a reconciliation of non-GAAP items.
Term
Savings & Money Market
Checking with Interest
Demand Term
Savings & Money Market
Checking with Interest
Demand
Cost of deposits: 1.32% Cost of deposits: 0.24%
$98.8 billion 2009 average deposits $104.0 billion 2Q16 average deposits
Deposit mix has improved significantly with core deposits(1) of 83% in 2Q16
Period-end loan-to-deposit ratio of 98% at 2Q16
– Excluding wholesale deposits, average deposits increased $1.3 billion in 2Q16 from 1Q16
24
Solid deposit base provides attractive, low-cost funding
Wholesale Wholesale
68% Core(1) 83% Core(1)
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
17.9% 16.7%
14.7% 14.7% 13.8%
13.0% 12.8%
10.7% 10.3% 9.9% 8.5%
PNC FITB USB KEY BBT Peer Avg CFG STI MTB CMA RF
FHLB advances Repurchase agreements soldFed funds purchased Trading liabilitiesCommercial paper Subordinated notes and debenturesSenior debt/other
1) Source: SNL Financial, based on regulatory data as of 6/30/2016. 2) Based on the September 2014 release of the U.S. version of the Liquidity Coverage Ratio (LCR). Note that as a modified LCR company, CFG’s minimal LCR requirement
of 90% began January 2016.
Total Borrowings/Total Liabilities
25
Targeting a more peer-like funding structure
(1)
Continue to broaden funding base with a goal of further enhancing stability and resiliency
Fully compliant with LCR requirement(2)
Holding Company market transactions include: $250 million preferred stock offering in April 2015; $250 million in ten-year
subordinated notes in July 2015; $750 million in ten-year subordinated notes in December 2015; $350 million in five-year
senior notes in July 2016; $1.4 billion of subordinated notes repurchases from RBS since December 2015
Bank market transactions include: $1.5 billion senior note offering in December 2014, with $750 million in three-year notes
and $750 million in five-year notes; $750 million in three-year senior notes in December 2015; $750 million in three-year
notes in March 2016; and $1 billion in five-year notes in May 2016
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
Risk management
26
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
31%
25%
26%
3% 10%
2% 3%
64%
22%
8% 6%
0.3%
0.5% 0.6% 0.6%
1.0% 1.0%
0.3% 0.3% 0.3%
0.8% 0.7%
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
0.5% 0.5%
0.6% 0.5% 0.4%
0.5% 0.5%
0.6% 0.6% 0.5%
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
1.6% 1.5% 1.5% 1.5% 1.4%
1.3% 1.3% 1.2% 1.3% 1.2%
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
$54.0 billion 2Q16 retail portfolio
1) Source: Company data. Portfolio balances loan category, NCO and NPL data as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of May 31, 2016, as applicable.
2) Footprint defined as 11-state branch footprint (CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI & VT) and contiguous states where CFG maintains offices (IL, IN, KY, MD & ME). 3) Source: SNL Financial. Product view - regulatory reporting basis. Peer banks include CMA, BBT, FITB, KEY, MTB, PNC, RF, STI and USB. Due to recent acquisitions, BBT
excluded from 1Q16-2Q16 and MTB excluded from 4Q15-2Q16 peer average. NPL% equals nonaccrual loans plus 90+ days past due and still‐accruing loans (excluding FDIC “covered” loans and loans guaranteed by the U.S. government) as a % of total.
$49.6 billion 2Q16 commercial portfolio
Mid-Atlantic
Midwest
New England
Leases
C&I
CRE Mid-Atlantic
Midwest
New England
27
Diversified and granular loan mix
Weighted-average FICO score of 757
85% collateralized
70% of the consumer real estate portfolio is secured by a 1st lien
Highly granular and diversified portfolio in terms of geography, industry, asset class and rating
Home Equity
Indirect Auto
Residential Mortgage
Education Finance
Credit Cards
Other Non-Core
Business Banking
Retail NCO% Retail NPL% Commercial NPL% Commercial NCO%
33%
12%
31%
24%
Out of footprint(1,2) 25%
15%
33%
27%
CFG Peers
CFG vs. Peers(3)
Out of footprint
0.1% 0.3% 0.2% 0.3% 0.3%
0.0% 0.0% 0.0% 0.1% 0.1% 2
Q1
5
3Q
15
4Q
15
1Q
16
2Q
16
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
$2.4
$1.8 $1.9
$1.4 $1.1 $1.1 $1.0
2010 2011 2012 2013 2014 2015 2Q16
Strong credit quality
Source: SNL Financial for peers including BBT, CMA, FITB, KEY, MTB, PNC, RF, STI and USB. BBT and MTB excluded from 2Q16 peer average due to recent acquisitions. 1) Non-GAAP item. See Appendix for a reconciliation of non-GAAP items. 2) NPL% equals Nonaccrual plus 90+ days past due and still accruing loans (excluding covered loans and loans guaranteed by the U.S. government) as a % of total. Beginning
in 2016 CFG NPL% equals Nonaccrual (excluding covered loans and loans guaranteed by the U.S. government) as a % of total.
Overall portfolio credit metrics have generally trended in line with regional banking peers
Core portfolio credit trends are favorable; Non-core portfolio has been a drag, but continues to run off
Core Non-Core
Non-performing loans/Loans Net charge-offs/Average loans
Net charge-offs $s in millions
Non-performing loans $s in billions
28
$1,849
$1,165
$875
$501 $323 $284
$148
2010 2011 2012 2013 2014 2015 1H16
2012 2013 2014 2015 2Q16
Total 1.01% 0.59% 0.36% 0.30% 0.25%
Core(1) 0.60% 0.38% 0.30% 0.26% 0.20%
Non-Core(1) 5.68% 4.12% 1.99% 1.68% 3.11%
Peers 0.86% 0.52% 0.38% 0.29% 0.35%
(2)
2012 2013 2014 2015 2Q16
Total 2.14% 1.65% 1.18% 1.07% 1.01%
Core(1) 1.82% 1.44% 1.02% 0.93% 0.89%
Non-Core(1) 6.80% 6.24% 6.04% 6.75% 6.96%
Peers 1.57% 1.17% 0.97% 0.81% 1.03%
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
$181
$363
29
Credit expected to remain favorable
Source: SNL Financial and Company filings. Peer banks include BBT, CMA, FITB, KEY, PNC, RF, STI and USB; due to recent acquisitions, BBT excluded from 1Q16-2Q16 and MTB excluded from 4Q15-2Q16 peer average.
Credit costs gradually normalizing with modest reserve build to fund continued loan growth
1H16 Provision expense
1H16 Annualized provision expense
Shows credit costs largely
baked-in
Provision outlook
2016 Outlook Largely reflects
reserves to fund loan
growth
1.24% 1.23% 1.23% 1.21% 1.20%
1.10 x 1.12 x 1.10 x 1.09 x 1.14 x
2Q15 3Q15 4Q15 1Q16 2Q16
Allowance/Total loans Allowance/NPAs
0.33% 0.31% 0.31%
0.33% 0.25% 0.26% 0.29% 0.31%
0.36% 0.35%
2Q15 3Q15 4Q15 1Q16 2Q16
CFG Peer average
$1,088 $1,073 $1,106 $1,127 $1,092
1.13% 1.10% 1.12% 1.12% 1.05%
2Q15 3Q15 4Q15 1Q16 2Q16
NPA$s NPAs/Total loans
$375-$425 Sold $310 million TDR assets on July 19th and recorded a 3Q16 ~$70 million gain on sale through other income
Plan to utilize roughly 30-40% of the TDR Transaction gain to fund costs associated with efficiency initiatives and other balance sheet optimization costs in 3Q16
Nonperforming assets stable $s in millions
TDR transaction
Allowance metrics stable NCOs stable, comparable to peer average (Net charge-off ratio)
Aligned exclusions; excluded BBT from 1 and 2Q16; excluded MTB from 4Q15 – 2Q16;
$239
$71
$310
TDRs sold
TDRs Sold ($s in millions)
Performing
Non-performing
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
3% 5%
10%
20%
29%
33%
Core retail portfolio
Highlights
Weighted-average core FICO score of 759
62% of the retail portfolio has a FICO score
of > 750
Core Mortgage – average portfolio FICO of
772 and LTV of 63%
2Q16 originations of $2.0 billion with
weighted-average FICO of 768 and yield
of 3.20%
Auto Finance – Largely purchase only, no
leasing, average portfolio FICO of 735
64% new-car loans
2Q16 originations of $1.8 billion with
weighted-average FICO of 745 and
weighted-average yield of 3.75%
Student Lending
95% of InSchool loans co-signed with
average portfolio FICO of 775
2Q16 InSchool originations of $20 million
with average FICO of 763 and 83%
co-sign rate
2Q16 refi product originations of $338
million with weighted-average FICO of 782
by Product type by Geography
2Q16 $52.1 billion core retail portfolio
30
Out of Footprint New England
Mid-Atlantic
Midwest
Home Equity
Mortgage
Auto
Cards
Education Finance Other
800+
750-799
700-749
650-699
600-649 <600
by FICO
Note: excludes $1.8 billion of non-core loans, including $1.3 billion of home equity, $310 million of student and $266 million of residential mortgage. 1) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of
May 31, 2016, as applicable.
(1)
(1)
32%
26%
27%
3%
10%2%
27%
34%
14%
25%
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
64%
22%
10% 3%1%
6%8%
17%
27%
42%
8%
9%
13%
17%18%
35%
51%49%
32%
68%
WA FICO 744
WA FICO 769
Core home equity portfolio(1)
1) As of June 30, 2016. Excludes serviced by other portfolio. 2) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of
May 31, 2016, as applicable.
by Loan-to-value
by FICO
by Lien position by Lien position
by FICO
≤649 650-699
700-749
750-799
800+
<70%
90-100%
600-649
650-699
700-749 750-799
800+
<600
100%+ 80-89%
71-79%
<70%
2nd
1st 2nd
1st
70-79%
80-89%
52% of the portfolio is secured by 1st lien
Weighted-average FICO of 766
86% has an LTV of less than 80%
2Q16 HELOC originations of $1.1 billion
─ Weighted-average FICO score of 789 and a weighted-average CLTV of 64.1%
─ 57% of originations are first-lien
Highlights
100%+ 90-100%
Total home equity portfolio
31
86% with LTV <80% 88% with LTV <80%
(2)
(2)
(2)
(2)
(2)
(2)
2Q16 $14.4 billion HELOC 2Q16 $2.2 billion HELOAN
80%
8%
6% 3%3%
$s in billions 2013 2014 2015 1Q16 2Q16
EOP balance $20.1 $18.7 $17.1 $16.7 $16.5
Avg. balance $20.7 $19.4 $17.2 $17.0 $16.6 30-Day past due % of EOP loans
2.53% 2.71% 2.76% 2.61% 2.57%
NPLs % of EOP loans
2.93% 2.41% 2.35% 2.13% 2.14%
NCOs % of Avg. loans
0.66% 0.47% 0.34% 0.26% 0.20%
by Loan-to-value
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
32
Highlights
In no single year is the maturing population balance greater than $1.7 billion
Between 2016 and 2018, $3.4 billion ($3.3 billion core and $92 million non-core) is remaining to mature, including $36 million in balloons, or 23%, of the total drawn HELOC balances and $3.2 billion in undrawn exposure
─ 90% of the payment shock population has a FICO score greater than 740 or an LTV of 80% or lower
Proactive mitigation efforts
Maturing vintages as of June 30, 2016
Initiated comprehensive mitigation plan to manage exposure and assist customers through reset by offering alternative financing/forbearance options
─ Begin reaching out two years in advance of maturity dates
─ Policies, procedures and monitoring requirements; guidance on TDR/collateral dependency recognition
─ Enhanced product to maximize customer options – new 30-year, high-LTV HE loan product
─ Proactive assessment of unused lines before maturity to manage higher-risk customers
HELOC payment shock management
Charged-off
2013 – $668 million 2014 – $899 million
30+ Delinquent
Loan modification
Current without changes
Off-us refinance
CFG refinance
2015 – $1.26 billion
2016-2018 Maturing Population:
34% Sr. Lien; 72% <80% CLTV; 68% >740 FICO
90% <80% CLTV or >740 FICO
Maturity schedule 2016 - 2018 As of June 30, 2016
$s in billions
1) Includes serviced by other portfolio.
(1)
14%
51%
24%
5% 2% 4%
28%
32%
28%
6% 3% 3%
46%
25%
20%
3% 4% 2%
$14.7
$11.3
($0.4) ($1.4) ($1.6)
Total O/S 2016 2017 2018 2019+
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
2% 3%
6%
17%
34%
38%
Core mortgage portfolio overview
Highlights
Jumbo mortgages originated primarily within the Bank’s lending footprint
Predominately in-footprint with a weighted-average refreshed portfolio FICO score of 772 and CLTV of 63%
2Q16 originations of $2.0 billion with
weighted-average FICO of 768 and yield
of 3.19%
OREO portfolio of 149 units at $17.4 million
2Q16 $13.6 billion core mortgage portfolio
by Refreshed CLTV by Refreshed FICO
$s in billions 2013 2014 2015 1Q16 2Q16
EOP balance $9.0 $11.5 $12.6 $13.1 $13.6
Avg. balance $8.6 $10.3 $12.0 $13.2 $13.2 30-Day past due % of EOP loans
4.68% 3.44% 2.58% 2.33% 2.45%
NPLs % of EOP loans 3.66% 2.64% 2.30% 1.23% 1.17%
NCOs % of Avg. loans 0.38% 0.16% 0.07% 0.10% 0.07%
33
600-649
650-699
700-749
<600 90-100%
71-79%
80-89%
100%+
Origination detail $s in millions
Credit trends
Note: Excludes $266 million of non-core mortgage loans as of 6/30/16. 1) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of
May 31, 2016, as applicable.
(1) (1)
$1,523 $1,561 $1,426 $1,386
$1,964
760 759765
774768
2Q15 3Q15 4Q15 1Q16 2Q16
Origination volume WA FICO
62%
26%
8%3%1%
750-799
<70%
800+
72% 73% 73% 72% 74%
WA LTV
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
26%
8%
36%
30%
2% 6%
14%
27%
17%
35%
700-739
Core education finance portfolio overview
Highlights
by Refreshed FICO
Credit trends
Note: YoY delinquency and NPL improvement driven by sale of FFELP loans in 3Q 2014. Previous origination data was based on amounts disbursed to students per quarter and represented balance sheet loan growth. Current data represents full amounts originated per quarter that have been committed to borrowers. 1) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of
May 31, 2016, as applicable.
Core education finance portfolio average FICO score of 774 and
co-sign rate of 52%
95% of InSchool loans co-signed with average portfolio FICO of
775
2Q16 InSchool originations of $20 million with average FICO
of 763 and 83% co-sign rate; reflects seasonally elevated
levels of higher-income earning borrowers
Total organic refinance portfolio of $1.8 billion
2Q16 refi product originations of $338 million with
weighted-average FICO of 782
SoFi purchased portfolio balance of $1.3 billion with average
FICO of 773
34
<650
740-779
650-699
780-799
800-850
by Segment
InSchool
Legacy run off
Refinance loan
Acquired portfolios
(1)
$s in billions 2013 2014 2015 1Q16 2Q16
EOP balance $1.8 $1.9 $4.0 $4.7 $5.2 Avg. balance $1.5 $1.7 $3.0 $4.9 $5.1 30-Day past due % of EOP loans
3.77% 1.13% 0.72% 0.55% 0.48%
NPLs % of EOP loans
1.80% 0.53% 0.45% 0.30% 0.25%
NCOs % of Avg. loans
0.53% 0.37% 0.41% 0.35% 0.40%
2Q16 $5.2 billion core education finance portfolio
Origination Detail
$s in millions
(1)
$389
$544
$267
$345 $321
780 777 777 773 776
2Q15 3Q15 4Q15 1Q16 2Q16InSchool ERL WA Origination FICO
86% 96% 95% 93% 83%
38% 39% 38% 39% 36%
In School origination co-sign rate ERL origination co-sign rate
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
1% 2%
14% 2% 2%
35% 24%
21%
15%
15%
20% 22%
16%
12% 5% 8%
17%
24%
24%
22%
Auto portfolio credit metrics
35
$s in billions
Auto Finance portfolio – purchase only, no
leasing, weighted-average FICO score
of 735
2Q16 originations of $1.8 billion with
weighted-average FICO score of 745 and
weighted-average yield of 3.75%
70% of the portfolio has a FICO score of
greater than 700, 56% < 72 months and
64% are new-car loans
76- to 84-month term originations have a
weighted-average FICO score of 768
Highlights
601-649
650-699
700-749
750-799
≥ 800
by FICO score
by Term ≤ 36 37-48
49-60 76-84
61-63
64-66
67-72
73-75
by LTV
80-89%
90-99% 100-109%
110-119%
≥ 120 ≤ 80 ≤ 600
1) Assumes that for loans where refreshed FICO score information not available, the balance stratification is consistent with the remainder of the portfolio. 2) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications
as of May 31, 2016, as applicable. LTV calculated utilizing actual invoice amount or Kelley Blue Book value.
(1)
(1,2)
Auto + SCUSA Originations
(2)
(2)
(2)
(2)
2Q16 $14.1 billion Auto portfolio
$2.0
$1.7 $1.5 $1.5
$1.8
98% 98% 99% 99% 99%
742 745 748 742 745
2Q15 3Q15 4Q15 1Q16 2Q16
Total WA LTV WA FICO(2)
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
20%
7%
7%
6%
5% 5% 5%
5% 4%
4%
4%
3% 3%
3% 3% 2%
2% 2%
14%
Commercial portfolio overview
Asset quality relatively stable and has reached pre-crisis levels
Overall credit risk is moderate and compares well with peers
– $21.6 billion shared national credit portfolio as of 2Q16
– $9.5 billion Commercial Real Estate business portfolio as of 2Q16
Quality of new originations compares favorably to overall portfolio
Highlights 2Q16 $49.6 billion commercial portfolio
Real Estate All Other(3)
Food & Beverage
Healthcare
Business Services
Machinery & Equipment
Transportation
Technology
Banking & Financial Services
36
Restaurants
by Industry Sector
1) By industry SIC code. 2) Comprises exposure to companies at risk from impact of declining oil prices. 3) All Other stratifies over an additional 15 industry classifications with the largest portion representing no more than 1.49% of the total portfolio. 4) Includes non oil-price sensitive industries such as Water Supply, Sewer Systems, Refuse Systems, and Sanitary Systems. 5) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of
May 31, 2016 as applicable.
(1)
Oil & Gas(2)
Rating agency-equivalent risk rating
Entertainment
Education services
Chemicals
Metals & Mining
Healthcare products
Lessors
Automotive
All other energy(4)
(5)
2% 2% 3% 3% 3% 10% 9% 9% 10% 9%
56% 57% 57% 58% 58%
26% 26% 26% 26% 27% 6% 6% 5% 3% 3% $45.1B $45.3B $46.2B $48.0B $49.6B
2Q15 3Q15 4Q15 1Q16 2Q16
A- to AAA
BBB- to BBB+
BB- to BB+
B to B+
B- and Lower
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
32%
22% 7% 6%
6%
4% 2% 1% 1%
18%
54%
2%
23%
2%
17%
1%
Commercial Real Estate line of business overview
37
Strategy to uptier portfolio to larger, more well-capitalized institutional and upper middle-market borrowers – Investment Grade-Equivalent Risk-Rated
portfolio up ~$122 million since 2Q15
– REIT portfolio up $46 million since 2Q15
73% of the portfolio is Project-Secured lending, 54% represented by income-producing projects, and 23% Real Estate Investment Trusts, with a particular focus on mid-caps
Approximately 1% land financing
2Q16 $9.5 billion Commercial Real Estate Line of Business
by Facility Type
Rating agency-equivalent risk rating
Income producing
REIT Corporate
facilities
Construction
Unsecured (excl. REITs)
Other
Land
by Property Type
Office
Multi-family
Retail
Non-CRE collateral
Healthcare
Hospitality
Land
Other CRE collateral
Industrial
Unsecured
Highlights
By Geography
(1)
1) Portfolio balances as of June 30, 2016. FICO score, LTV ratio, loan term, lien position, risk rating, property type, industry sector and geographic stratifications as of May 31, 2016 as applicable.
28%
11%
23%
38%
New England
Midwest
Mid-Atlantic
Other
1% 2% 2% 2% 2% 9% 10% 9% 12% 12%
58% 56% 58% 57% 56%
31% 31% 30% 28% 29% 1% 1% 1% 1%
1% $8.0B
$8.4B $8.7B $9.0B $9.5B
2Q15 3Q15 4Q15 1Q16 2Q16
A- to AAA
BBB- to BBB+
BB- to BB+
B to B+
B- and Lower
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
B- and lower
24%
20%
16% 7%
8%
25%
1.8%
98.2%
23%
28% 20%
29%
$s in mi l l ions
Total
O/S
Uti l i zed
%
Criticized
%
Nonaccrual
s tatus
Less price-sens itive tota l 731$ 64% 2% 0$
Upstream 295 66%
Oi l field Services 355 73%
Reserve-based lending (RBL) 425 65%
More price-sens itive tota l 1,075 68% 57% 195
Tota l Oi l & Gas 1,806$ 66% 35% 195$
Total Oil & Gas ex. Aircraft 1,471$ 62% 43% 195$
Oil & Gas portfolio overview
Well-diversified portfolio with ~100 clients
Includes $335 million of corporate aircraft leases arising from Asset Finance
Nonperforming loans down $15 million largely due to pay downs on RBL portfolio
Existing RBL commitments declined by 17% due to 2Q16 borrowing base redeterminations and restructuring activity; a new credit extension of ~$50 million partially offset these reductions
Oil and gas portfolio loan loss reserves of $80 million as of 6/30/16
─ Reserves to total loans of more price-sensitive portfolios now at 8.5%(3), up from 6.3% in 1Q16
38
Highlights
Total loans outstanding(2)
Oil & Gas
All other loans
1) Includes Downstream, Integrated, and Midstream sub-categories. 2) Portfolio balances, risk rating and industry sector stratifications as of June 30, 2016. 3) Reserves/(More price-sensitive Oil & Gas portfolio outstandings - leases secured by aircraft ($133 million)).
BBB+ to BBB-
BB+ to BB- B+ to
B
23% investment grade
~$1.1 billion more sensitive
to declining oil prices
Midstream
Integrated
Downstream
Reserve-based lending (RBL)
Upstream, Non-RBL
Oil Field Services
Oil & Gas portfolio by Sub-sector(2)
Oil & Gas portfolio by Investment grade-equivalent risk rating(2)
(1)
2Q16 Oil & Gas outstandings
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
Non-core portfolio overview
Non-core assets as of 2Q16
Non-core assets
Home equity serviced by others (SBO) $1.1
Consumer real-estate secured 0.4
Student 0.3
Commercial real estate 0.1
Commercial 0.1
Non-core CFG $2.0
Drivers of non-core asset reduction
$20.5 billion of assets identified as Non-core in June 2009; only $2.0 billion remain
─ Down 65% from end of 2012
─ Represents ~2% of total loan portfolio
SBO portfolio 76% home equity loans and 24% HELOC as of 2Q16
─ Refreshed WA CLTV improved to 89.1% due to Case Shiller forecast improvement; now 91% < 100% LTV
─ Accounted for < 1.1% of total loans but contributed 13% of charge-offs in 2Q16
Highlights
39
$s in billions
$20.5
$2.0
($10.5)
($1.3) ($2.8)
($3.9)
Jun-09 Runoff Sales Transfersto Core
NetCharge-
offs
2Q16
$20.5
$17.3
$13.4
$8.4
$5.7 $3.8 $3.1 $2.3 $2.0
June2009
2009 2010 2011 2012 2013 2014 2015 2Q16
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
Appendix
40
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
Non-GAAP reconciliation table
41
(Excluding restructuring charges and special items)
$s in millions
1) Basel III ratios assume certain definitions impacting qualifying Basel III capital, which otherwise will phase in through 2019, are fully phased-in. Ratios also reflect the required US
Standardized methodology for calculating RWAs, effective January 1, 2015.
FOR THE QUARTER FOR THE QUARTER
ENDED JUNE 30, ENDED JUNE 30,
2016 Change
2016 2015 from 2015
Noninterest income, excluding special items:
Noninterest income (GAAP) $355 $360
Less: Special items — —
Noninterest income, excluding special items (non-GAAP) $355 $360 (1.4)%
Less: Card reward accounting change — 7
Noninterest income, adjusted for card reward accounting change and excluding special items (non-GAAP) $355 $353 0.6 %
Total revenue, excluding special items:
Total revenue (GAAP) A $1,278 $1,200
Less: Special items - -
Total revenues, excluding special items (non-GAAP) B $1,278 $1,200 6.5 %
Less: Card reward accounting change - 7
Total revenues, adjusted for card reward accounting change and excluding special items (non-GAAP) $1,278 $1,193 7.1 %
Noninterest expense, excluding restructuring charges and special items:
Noninterest expense (GAAP) C $827 $841
Less: Restructuring charges and special items — 40
Noninterest expense, excluding restructuring charges and special items (non-GAAP) D $827 $801 3.2 %
Less: Card reward accounting change - 7
Noninterest expense, adjusted for card reward accounting change and excluding restructuring charges and special items (non-GAAP) $827 $7944.2 %
Efficiency ratio:
Efficiency ratio (non-GAAP) C/A 65 % 70 %
Efficiency ratio, excluding restructuring charges and special items (non-GAAP) D/B 65 % 67 % (199) bps
Operating leverage:
Total revenue (GAAP) $1,278 $1,200 6.5%
Noninterest expense (GAAP) $827 $841 (1.7)%
Operating leverage (non-GAAP) 816 bps
Operating leverage, excluding restructuring charges and special items:
Total revenue, excluding restructuring charges and special items (non-GAAP) $1,278 $1,200 6.5%
Less: Noninterest expense, excluding restructuring charges and special items (non-GAAP) $827 $801 3.2%
Operating leverage, excluding restructuring charges and special items: (non-GAAP) 325 bps
Net income, excluding restructuring charges and special items:
Net income (GAAP) E $243 $190
Add: Restructuring charges and special items, net of income tax expense — 25
Net income, excluding restructuring charges and special items (non-GAAP) F $243 $215 13.0 %
Net income available to common stockholders, excluding restructuring charges and special items:
Net income available to common stockholders (GAAP) G $243 $190
Add: Restructuring charges and special items, net of income tax expense - 25
Net income available to common stockholders, excluding restructuring charges and special items (non-GAAP) H $243 $215 13.0 %
Return on average tangible common equity and return on average tangible common equity, excluding restructuring charges and special items:
Average common equity (GAAP) $19,768 $19,391
Less: Average goodwill (GAAP) 6,876 6,876
Less: Average other intangibles (GAAP) 2 5
Add: Average deferred tax liabilities related to goodwill (GAAP) 496 437
Average tangible common equity (non-GAAP) I $13,386 $12,947
Return on average tangible common equity (non-GAAP) G/I 7.30 % 5.90 %
Return on average tangible common equity, excluding restructuring charges and special items (non-GAAP) H/I 7.30 % 6.67 % 63 bps
Return on average total assets, excluding restructuring charges and special items:
Average total assets (GAAP) J $142,179 $135,521
Return on average total assets, excluding restructuring charges and special items (non-GAAP) F/J 0.69 % 0.64 % 5 bps
Pro forma Basel III fully phased-in common equity tier 1 capital ratio1:
Common equity tier 1 (regulatory) $13,768
Less: Change in DTA and other threshold deductions (GAAP) 1
Pro forma Basel III fully phased-in common equity tier 1 (non-GAAP) K $13,767
Risk-weighted assets (regulatory general risk weight approach) $119,492
Add: Net change in credit and other risk-weighted assets (regulatory) 228
Basel III standardized approach risk-weighted assets (non-GAAP) L $119,720
Pro forma Basel III fully phased-in common equity tier 1 capital ratio (non-GAAP)1K/L 11.5%
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
Non-GAAP reconciliation table
42
(Excluding restructuring charges and special items)
$s in millions
FOR THE QUARTER FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED JUNE 30, ENDED JUNE 30, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31, ENDED DECEMBER 31,
2016 2016 2015 2014 2013 2012 2011 2010
Core annualized net charge-offs:
Net charge-offs (GAAP) O $65 $148 $284 $323 $501 $875 $1,165 $1,849
Non core net charge-offs (non-GAAP) P 16 26 44 67 195 393 652 1,123
Core net charge-offs (non-GAAP) Q $49 $122 $240 $256 $306 $482 $513 $726
Average total loans and leases (GAAP) R 102,677 96,150 89,042 85,405 86,974
Non-core average total loans and leases (non-GAAP) S 2,049 2,653 3,381 4,726 6,922
Core average total loans and leases (non-GAAP) T $100,628 $93,497 $85,661 $80,679 $80,052
Annualized net charge-off rate (GAAP) O/R 0.25% 0.30% 0.36% 0.59% 1.01%
Core annualized net charge-off rate (non-GAAP) Q/T 0.20% 0.26% 0.30% 0.38% 0.60%
Non core annualized net charge-off rate (non-GAAP) P/S 3.11% 1.68% 1.99% 4.12% 5.68%
Core non-performing loans
Non-performing loans (GAAP) U $1,044 1,060 1,101 1,416 1,869 1,784 2,355
Non core non-performing loans (non-GAAP) V 137 156 183 235 382
Core non-performing loans (non-GAAP) W $907 $904 $918 $1,181 $1,487
Total loans and leases (GAAP) X 103,551 99,042 93,410 85,859 87,248
Non core total loans and leases (non-GAAP) Y 1,981 2,312 3,035 3,761 5,609
Core total loans and leases (non-GAAP) Z $101,570 $96,730 $90,375 $82,098 $81,639
Non-performing loans/total loans (GAAP) U/X 1.01% 1.07% 1.18% 1.65% 2.14%
Core non-performing loans/total core loans (non-GAAP) W/Z 0.89% 0.93% 1.02% 1.44% 1.82%
Non core non-performing loans/total non core loans (non-GAAP) V/Y 6.96% 6.75% 6.04% 6.24% 6.80%
198,217,241 55,96,146 127, 127, 127 0,157, 120 91,137,193 189,221,209 192,192,192 255,201,47
43