Latest News

01/18/2019

Citizens Financial Group, Inc. Reports Fourth Quarter Net Income of $465 Million and Diluted EPS of $0.96

Underlying net income of $474 million up 36% and diluted EPS of $0.98 up 38% year over year*

ROTCE of 13.8%; Underlying ROTCE of 14.1% in fourth quarter 2018, up 3.7% year over year*

2018 net income of $1.7 billion and $3.52 diluted EPS

2018 Underlying net income of $1.7 billion up 32% and diluted EPS of $3.56 up 38% from 2017*

4.0% Underlying operating leverage in 2018 before the impact of Franklin American Mortgage Company*

Board declares a 19% increase in quarterly common stock dividend

PROVIDENCE, R.I.--(BUSINESS WIRE)-- Citizens Financial Group, Inc. (NYSE: CFG or “Citizens”) today reported fourth quarter net income of $465 million, or $0.96 per diluted common share, compared with fourth quarter 2017 net income of $666 million, or $1.35 per diluted common share. Fourth quarter 2018 results reflect a net $9 million after-tax reduction, or ($0.02) per fully diluted share, from notable items compared with a net $317 million after-tax benefit, or $0.64 per share, in fourth quarter 2017. Fourth quarter 2018 Return on Average Tangible Common Equity* (“ROTCE”) of 13.8% compares with fourth quarter 2017 of 19.9%.

Full year 2018 net income available to common stockholders of $1.7 billion and diluted EPS of $3.52 compares with $1.6 billion and diluted EPS of $3.25 in 2017. 2018 ROTCE* of 12.9% compares with 12.3% in 2017. 2018 results reflect a net $16 million after-tax reduction, or ($0.04) per fully diluted share, from notable items compared with a net $340 million after-tax benefit, or $0.67 per share, in 2017.

Excluding notable items, on an Underlying basis,* fourth quarter 2018 net income available to common stockholders of $459 million, or $0.98 per diluted share, increased 32% and 38%, respectively, from fourth quarter 2017 and increased 4% and 5%, respectively, from third quarter 2018. Underlying fourth quarter 2018 ROTCE* of 14.1% improved from 10.4% in fourth quarter 2017 and 13.5% in third quarter 2018. On an Underlying basis,* full year 2018 net income available to common stockholders of $1.7 billion increased 32% and diluted EPS of $3.56 increased 38% from 2017 levels. On an Underlying basis,* 2018 ROTCE of 13.1% compares with 9.8% in 2017.

“We are pleased to end the year with another quarter of strong results for Citizens, continuing our track record of consistent execution and delivering against our goals,” said Chairman and Chief Executive Officer Bruce Van Saun. “We are executing well and head into 2019 with good momentum as evidenced by our continued strong operating leverage, balance sheet growth, expanding customer base and broadening of our capabilities, including our recent acquisition of Clarfeld Financial Advisors.”

Van Saun continued, “We are pleased to have already achieved the lower end of our medium-term ROTCE target and are now increasing the range to 14 to 16 percent. Our strong performance has allowed us to raise our dividend today by a further 19%, as we continue to deliver strong value for all our stakeholders.”

*Please see important information on Key Performance Metrics and Non-GAAP Financial Measures, as applicable, at the end of this release for an explanation of our use of these metrics and non-GAAP financial measures and their reconciliation to GAAP financial measures. Where there is a reference to “Underlying” results in a paragraph, all measures that follow these references are on the same basis, when applicable. References to “Underlying results excluding FAMC” exclude the impact of the August 1, 2018 FAMC acquisition and notable items, as applicable. Additional information regarding the impact of the FAMC acquisition and notable items may be found in the Notable Items portion of this release. Throughout this release, references to consolidated and/or commercial loans and loan growth include leases. Loans held for sale are also referred to as LHFS. Current reporting-period regulatory capital ratios are preliminary. Select totals may not foot due to rounding.

Citizens’ board of directors has declared a 19% increase in its quarterly cash dividend to $0.32 per common share. The first quarter dividend is now 45% higher than a year ago. The dividend is payable on February 14, 2019 to shareholders of record at the close of business on January 31, 2019.

Fourth Quarter 2018 vs. Third Quarter 2018

Key Highlights

• Fourth quarter highlights include ROTCE of 13.8% and Underlying ROTCE* of 14.1%. Underlying results excluding the impact of notable items and Franklin American Mortgage Company (“FAMC”)* reflect revenue growth of 2%, driven by strength in noninterest income and net interest income given average loan growth of 2% and a three basis point improvement in net interest margin.
• Fourth quarter 2018 results reflect a net $9 million after-tax reduction, or ($0.02) per fully diluted share, from notable items compared with a net $7 million after-tax reduction, or ($0.02) per share, in third quarter 2018.
• Results reflect an efficiency ratio of 59.7%, which includes the impact of $45 million of notable expense items and a 93 basis point impact tied to the FAMC acquisition. Excluding the impact of notable items and FAMC, the Underlying efficiency ratio* improved by 118 basis points to 55.8% given strong expense discipline with positive operating leverage of 2.1%.
• Tangible book value per common share of $28.73 increased by 4%. Fully diluted average common shares outstanding decreased by 8.5 million shares.

Results

• Total revenue of $1.6 billion increased 2%, reflecting strength in noninterest income and net interest income.
• Net interest income of $1.2 billion increased $24 million, reflecting 2% average loan growth and a three basis point improvement in net interest margin to 3.22% from third quarter levels.
• Net interest margin of 3.22% reflects improved yields on interest-earning assets, including the benefit of higher short-term interest rates and balance sheet optimization, partially offset by higher funding costs.
• Noninterest income of $421 million increased $5 million. Excluding the impact of notable items and FAMC,* noninterest income of $393 million remained relatively stable, as strength in foreign exchange and interest rate products and letter of credit and loan fees was largely offset by a reduction in mortgage banking and capital markets fees.
• Noninterest expense of $951 million increased $41 million driven by a $46 million increase tied to the FAMC acquisition and notable items. Excluding the impact of notable items and FAMC,* noninterest expense of $871 million decreased by $5 million as a reduction in other operating expense, largely tied to a reduction in FDIC insurance expense, and lower occupancy expense were partially offset by seasonally higher outside services and an increase in salaries and employee benefits tied to growth initiatives.
• Provision for credit losses of $85 million increased modestly from relatively low third quarter levels.
• Preferred dividends increased $8 million reflecting the impact of second and fourth quarter issuances.
• Efficiency ratio of 59.7%; 56.7% on an Underlying basis,* compares with 57.6% in third quarter 2018.
• ROTCE of 13.8%, improved from 13.3% in the third quarter 2018; ROTCE of 14.1% on an Underlying basis,* compares with 13.5% in third quarter 2018.

Balance Sheet

• Average interest-earning assets increased $1.6 billion, reflecting a $1.9 billion, or 2%, increase in loans, with strength in commercial and retail.
• Average deposits increased $727 million, given growth in savings and term.
• Nonperforming loans and leases (“NPLs”) to total loans and leases ratio of 0.68% improved from 0.73%, reflecting a reduction in commercial NPLs. Allowance coverage of NPLs increased to 156% from 149%.
• Net charge-offs of 29 basis points were stable with third quarter levels.
• Capital strength remains robust, with a preliminary common equity tier 1 (“CET1”) risk-based capital ratio of 10.6%.
• Repurchased 8.25 million shares of common stock in the quarter, and including common dividends, returned $427 million in capital to shareholders.
• Average loan-to-deposit ratio remained relatively stable at 98.4%; Period-end loan-to-deposit ratio improved to 97.6%.

Fourth Quarter 2018 vs. Fourth Quarter 2017

Key Highlights

• Fourth quarter results reflect a 32% decrease in net income available to common stockholders driven by the fourth quarter 2017 benefit of Tax Legislation and other notable items. Underlying net income available to common stockholders* increased 32%, led by revenue growth of 9%, with a 9% increase in net interest income and a 10% increase in noninterest income.
• Including the impact of notable items, results reflect operating leverage of 1.5%, an efficiency ratio of 59.7% and ROTCE of 13.8%.* Excluding the impact of notable items and FAMC,* operating leverage of 5.0% reflects continued strong focus on top-line growth and expense management, while the efficiency ratio improved by 2.7% to 55.8% and ROTCE improved by 3.6% to 14.0%.*
• Fully diluted average common shares outstanding decreased by 24.7 million shares.

Results

• Total revenue increased $109 million, or 7%; on an Underlying basis,* total revenue increased $131 million, or 9%. Total revenue, excluding the impact of notable items and FAMC,* increased $95 million, or 6%.
  • Net interest income increased 9% given 5% growth in average loans and a 14 basis point improvement in net interest margin.
  • Net interest margin of 3.22% reflects improved loan yields driven by the continued focus on balance sheet optimization and the benefit of higher rates, partially offset by an increase in funding costs.
  • Noninterest income of $421 million increased $17 million. Excluding the impact of notable items and FAMC,* noninterest income increased 2% as strength in card fees, letter of credit and loan fees and capital markets fees was partially offset by a reduction in mortgage banking fees, and other income.
• Noninterest expense increased 6% from fourth quarter 2017 driven by the $40 million impact of the FAMC acquisition and notable items. Excluding the impact of notable items and FAMC,* noninterest expense increased 2%, driven by a $24 million increase in salaries and employee benefits tied to the impact of our strategic growth initiatives and an increase in amortization of software and equipment and outside services expense. These increases were partially offset by lower other operating expense, largely due to lower FDIC insurance and pension costs, as well as lower occupancy expense.
• Provision for credit losses was relatively stable with fourth quarter 2017 levels, reflecting strong overall portfolio credit quality.
• ROTCE of 13.8% compares with 19.9% for fourth quarter 2017. Underlying ROTCE of 14.1% improved by 3.7% from 10.4%.*

Balance Sheet

• Average interest-earning assets increased $5.3 billion, or 4%, driven by loan growth of 5%, which reflects a 2% increase in retail and a 8% increase in commercial. Interest-earning assets, excluding the impact of FAMC,* increased 3%.
• Average deposits increased $4.0 billion, or 4%, on strength in term, savings, demand deposits and checking with interest. Citizens Access deposits ended the year at $3.0 billion and averaged $2.0 billion for the quarter.
• NPLs to total loans and leases ratio of 0.68% improved from 0.79%, reflecting a decrease in retail and commercial. Allowance coverage of NPLs of 156% improved from 142%.
• Net charge-offs of 29 basis points of loans remained relatively stable with fourth quarter 2017 levels, reflecting continued risk discipline and a strong economy.

2018 vs. 2017

Key Highlights

• Full year 2018 net income available to common stockholders of $1.7 billion increased $54 million, or 3%, while diluted EPS of $3.52 compares with $3.25 in 2017.
• 2018 results reflect a net $16 million after-tax reduction, or ($0.04) per fully diluted share, from notable items compared with a net $340 million after-tax benefit, or $0.67 per share, in 2017.
• On an Underlying basis,* full year 2018 net income available to common stockholders of $1.7 billion increased 32% and diluted EPS of $3.56 increased 38% from 2017 levels.
• ROTCE of 12.9% improved by 0.6%. Underlying ROTCE of 13.1% increased by 3.3%.*

Results

• Total revenue of $6.1 billion increased $421 million, or 7%. Underlying revenue growth* of $432 million, or 8%, was driven by a 9% increase in net interest income and a 5% increase in noninterest income. Total Underlying revenue, excluding the impact of FAMC,* of $6.1 billion, increased $370 million, or 6%.
  • Net interest income results reflect 4% average loan growth and a 17 basis point improvement in net interest margin.
  • Noninterest income of $1.6 billion increased 4%. Excluding the impact of notable items and FAMC,* noninterest income increased 1%, reflecting strength in foreign exchange and interest rate products, trust and investment services fees and card fees, partly offset by lower capital markets fees, mortgage fees and other income.
• Noninterest expense of $3.6 billion increased 4% driven by the $59 million impact of the FAMC acquisition and notable items. On an Underlying basis, excluding the impact of FAMC,* noninterest expense of $3.5 billion
  increased 3%.
• Efficiency ratio of 59.1% improved 181 basis points. On an Underlying basis,* the efficiency ratio of 58.1% improved by 1.8%. On an Underlying basis and excluding the impact of FAMC, the efficiency ratio of 57.7% improved by 2.2% and positive operating leverage was 4.0%.
• Capital strength remains robust, with a common equity tier 1 (“CET1”) risk-based capital ratio of 10.6%, compared with 11.2% at year-end 2017.
• Tangible book value per common share was $28.73, up 5%.
• Returned $1.5 billion to common shareholders including dividends and share repurchases, a 31% increase.

Year-over-Year update on Plan Execution

Consumer Banking

• Continued balance sheet momentum, with 3% average loan growth, highlighted by improving mix toward more attractive risk-adjusted return categories and 4% average deposit growth, including 5% growth in demand deposits.
• Citizens Access™, our new digital platform has attracted $3.0 billion in deposits through fourth quarter 2018; 96% of the balances are new to Citizens.
• Wealth management business continues to add capabilities highlighted by the acquisition of Clarfeld Financial Advisors LLC which closed in January, 2019. Continued progress with managed money revenue up 24% and financial advisors
  up 6%.
• Continued progress on integration of FAMC, while overall conforming mortgage origination mix improved to 80% fourth quarter 2018.

Commercial Banking

• Continued strong balance sheet performance with average loan growth of 6%, driven by our geographic, product and client-focused expansion strategies as well as strength in Commercial Real Estate. Average deposits up 2%.
  • Continue to benefit from investments to drive growth and diversification in fee income, highlighted by a 56% increase in M&A fees, a 16% increase in foreign exchange and interest rate products and a 18% increase in Commercial card fees. Achieved record number of Lead/Joint Lead Arranger transactions in loan syndications, up 9%. Capital Markets revenues held up reasonably well given weak debt capital markets conditions in fourth quarter 2018.

Efficiency and balance sheet optimization initiatives

• Continued good progress on Tapping Our Potential (TOP) V Program, which is on track to meet end of 2019 run-rate pre-tax benefit of approximately $90-$100 million.
• Balance Sheet Optimization initiatives to shift loan portfolio mix to higher-return categories continue to deliver benefits, with an estimated impact of approximately 5 basis points on net interest margin for full-year over year.

Earnings highlights: Reported Results:

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.

Notable items:

Fourth quarter and full year 2018 and 2017 results reflect notable items largely related to the impact of 2017 tax reform and our Tapping Our Potential (“TOP”) initiatives which have been excluded from reported results to better reflect Underlying operating results.* Fourth quarter 2018 reported results include the impact of a further benefit resulting from December 2017 Tax Legislation partially offset by other notable items, primarily associated with TOP and real estate efficiency initiatives.

Additionally, fourth quarter and full year 2018 results reflect integration costs tied to the August 1, 2018 FAMC acquisition as detailed in the table below.

The following table provides information on Underlying results excluding the impact of notable items and the FAMC acquisition.*

Underlying results/impact of the FAMC acquisition:*

Discussion of results:

Fourth quarter 2018 net interest income of $1.2 billion increased $24 million, or 2%, from third quarter 2018, given a 2% increase in average loans and loans held for sale and a three basis point improvement in net interest margin to 3.22%. The improvement in net interest margin reflects higher loan yields tied to higher rates, partially offset by increased deposit and funding costs.

Compared with fourth quarter 2017, net interest income increased $92 million, or 9%, driven by 5% average loan growth and a 14 basis point improvement in net interest margin. The improvement in net interest margin reflects higher interest-earning asset yields given higher rates and continued mix shift towards higher-yielding assets, partially offset by higher deposit and funding costs. Net interest margin, excluding the impact of FAMC,* improved 15 basis points to 3.23%.

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

Noninterest income of $421 million increased $5 million, or 1%, from third quarter 2018, driven by the $9 million impact of the FAMC acquisition largely in mortgage banking fees. Underlying noninterest income, excluding the impact of FAMC,* remained relatively stable as strength in foreign exchange and interest rate products and letter of credit and loan fees was largely offset by a reduction in mortgage banking and capital markets fees tied to overall market conditions. Securities gains of $6 million were partially offset by a $2 million net loss in foreign exchange and interest rate products tied to credit valuation adjustments, related to interest rate moves during fourth quarter 2018.

Compared to fourth quarter 2017, noninterest income increased $17 million, or 4%, including a $33 million impact of the FAMC acquisition. Underlying noninterest income, excluding the impact of FAMC,* increased $6 million, or 2%, driven by strength in card fees, letter of credit and loan fees, capital markets fees and foreign exchange and interest rate products. These increases were partially offset by lower mortgage banking fees and other income, reflecting a reduction in leasing income.

Noninterest expense of $951 million increased $41 million, or 5%, from third quarter 2018, driven by the $46 million increase tied to the FAMC acquisition and notable items, largely in salaries and employee benefits. Underlying noninterest expense, excluding the impact of FAMC,* of $871 million decreased by $5 million, as a reduction in other operating expense, tied largely to a reduction in FDIC insurance expense, and lower occupancy expense were partially offset by seasonally higher outside services and an increase in salaries and employee benefits tied to growth initiatives. Results reflect continued focus on expense discipline and the benefit of TOP efficiency initiatives.

Compared with fourth quarter 2017, noninterest expense increased $53 million, or 6%, driven by the impact of the FAMC acquisition and notable items. Underlying noninterest expense, excluding the impact of FAMC,* increased $13 million, or 2%, largely reflecting a $24 million increase in salaries and employee benefits tied to the impact of our strategic growth initiatives, as well as an increase in amortization of software and equipment and outside services expense. These increases were partially offset by lower other expense, largely tied to a reduction in FDIC insurance and pension costs, as well as lower occupancy expense.

The fourth quarter 2018 effective tax rate of 16.5%, including the impact of notable items tied to the true-up of December 2017 Tax Legislation, decreased from 23.2% for third quarter 2018 and increased from (32.4)% for fourth quarter 2017. On an Underlying basis, excluding notable items,* the effective tax rate was 21.9% for fourth quarter 2018 and 33.7% for fourth quarter 2017.

1) Represents period end unless otherwise noted.
2) Includes loans held for sale.
3) Current reporting period regulatory capital ratios are preliminary.

Total assets of $160.5 billion at December 31, 2018 increased $1.9 billion, or 1%, compared with September 30, 2018 driven by an increase in loans. Compared with December 31, 2017, total assets increased $8.2 billion, or 5%, driven by a $6.6 billion increase in loans and leases and loans held for sale, including a $1.5 billion increase tied to the FAMC acquisition, largely $653 million in loans held for sale and a $600 million mortgage servicing rights portfolio in non-interest earning assets.

Period-end interest earning assets of $146.2 billion increased $1.5 billion, or 1%, from September 30, 2018 as a $1.9 billion, or 2%, increase in loans and leases driven by particular strength in commercial, was partially offset by a $426 million decrease in investments and interest-bearing deposits, largely reflecting lower debt securities. Compared with December 31, 2017, period-end interest earning assets increased $6.9 million, or 5%, driven by loan and lease growth of $6.0 billion, or 5%, with growth in commercial and retail, and an increase in loans held for sale reflecting the impact of the FAMC acquisition. At the end of fourth quarter 2018, the average effective duration of the securities portfolio decreased to 4.4 years compared with 4.7 years at September 30, 2018, given lower long-term rates that drove an increase in securities prepayment speeds. At December 31, 2017, the securities portfolio duration was 3.9 years, reflecting the impact of lower rates and higher prepayment speeds.

Average interest-earning assets of $143.8 billion in fourth quarter 2018 increased $1.6 billion, or 1%, from third quarter 2018 driven by loan and lease growth of $1.9 billion, or 2%, with growth in commercial and retail. Commercial loan growth largely reflects strength in commercial loans and commercial real estate, partially offset by planned reductions in commercial leases. Retail loan growth reflects strength in residential mortgage, unsecured and education, partially offset by planned reductions in auto and lower home equity.

Compared with fourth quarter 2017, average interest-earning assets increased $5.3 billion, or 4%, driven by a $4.0 billion, or 8%, increase in commercial loans and leases, a $1.4 billion, or 2%, increase in retail loans and a $557 million increase in loans held for sale, reflecting the impact of the FAMC acquisition. Results also reflect a $659 million decrease in investments and interest-bearing deposits, largely reflecting the impact of higher rates. Commercial loan results reflect strength in commercial loans and commercial real estate, partially offset by the planned reductions in commercial leases. Retail loan growth was driven by mortgage, unsecured and education, partially offset by planned reductions in auto and lower home equity. Excluding the impact of FAMC,* average loan growth was 5%.

Total period-end deposits of $119.6 billion at December 31, 2018 increased $2.5 billion from September 30, 2018, reflecting an increase in savings, checking with interest, term deposits and money market accounts, partially offset by a decrease in commercial demand deposits. Compared with December 31, 2017, period-end total deposits increased $4.5 billion, or 4%, driven by growth in term deposits, savings, checking with interest and demand deposits, partially offset by a decrease in money market accounts. The increase in demand deposits includes $476 million tied to the FAMC acquisition. Excluding the impact of FAMC,* year-over-year deposit growth was 3%. Citizens Access deposits were $3.0 billion at the end of 2018, up from $1.0 billion at September 30, 2018.

Fourth quarter 2018 average deposits of $117.8 billion increased $727 million, or 1%, from third quarter 2018, reflecting growth in savings, term deposits and demand deposits, partially offset by a reduction in money market accounts. Compared with fourth quarter 2017, average deposits increased $4.0 billion, or 4%, reflecting growth in term, savings, demand deposits and checking with interest, partially offset by a decline in money market accounts. The increase in demand deposits includes $675 million tied to the FAMC acquisition. Excluding the impact of FAMC,* year-over-year average deposit growth was 3%. Citizens Access contributed average deposits of $2.0 billion in fourth quarter 2018 compared with $551 million in third quarter 2018.

Total borrowed funds of $17.2 billion at December 31, 2018 decreased $776 million from September 30, 2018, primarily driven by the maturity of $750 million of senior debt. Compared with December 31, 2017, total borrowed funds increased $2.8 billion, or 19%, driven by an increase in long-term FHLB advances including the funding of the FAMC acquisition, partially offset by a $340 million decrease of subordinated debt and other debt, reflecting redemptions.

Average borrowed funds of $16.7 billion increased $1.1 billion, or 7%, from third quarter 2018 and increased $2.0 billion, or 13% compared with the fourth quarter 2017.

1) Current reporting-period regulatory capital ratios are preliminary.

At December 31, 2018, our Basel III capital ratios remained well in excess of applicable regulatory requirements with a CET1 capital ratio of 10.6% compared with 10.8% at September 30, 2018 and 11.2% at December 31, 2017, and a total capital ratio of 13.3% compared with total capital ratios of 13.4% as of September 30, 2018 and 13.9% as of December 31, 2017. Our capital ratios continue to reflect progress towards our objective of aligning our capital profile with that of peer regional banks, while maintaining a strong capital base to continue to drive future performance.

Tangible book value per common share of $28.73 increased 4% from third quarter 2018 and 5% from fourth quarter 2017.

During the fourth quarter 2018, the company repurchased 8.25 million shares of common stock at a weighted-average price of $36.38, and including common dividends, returned $427 million to shareholders. These results compare with $529 million returned to common shareholders in third quarter 2018 and $424 million in fourth quarter 2017.

In 2018, the company repurchased 25.8 million shares of common stock at a weighted-average price of $39.77, and including common dividends, returned $1.5 billion to common shareholders, up 31% from 2017. Comparables for 2017 were repurchases of 22.4 million shares of common stock at a weighted-average price of $36.67, and including common dividends, $1.14 billion returned to common shareholders.

Overall credit quality remains strong, reflecting growth in high quality retail loans and a broadly stable risk profile in commercial portfolios. Nonperforming loans and leases of $797 million decreased $35 million, or 4%, from September 30, 2018, reflecting a $57 million decrease in commercial, given payoffs and returns to accruing status, partially offset by a $22 million increase in retail, driven by seasonal increases in home equity, credit card and auto, as well as the expected seasoning of the retail unsecured portfolio. Compared to December 31, 2017, nonperforming loans and leases decreased $74 million, or 8%, reflecting a $64 million decrease in commercial, given a reduction in nonperforming commodities-related credits, and a $10 million decrease in retail, largely in home equity. The nonperforming loans and leases to total loans and leases ratio of 0.68% at December 31, 2018 improved five basis points from 0.73% at September 30, 2018 and improved 11 basis points from 0.79% at December 31, 2017.

Net charge-offs of $85 million were relatively stable compared with third quarter 2018, reflecting an $8 million decrease in commercial, reflecting higher recoveries, partially offset by a $7 million increase in retail largely driven by expected seasoning in the retail unsecured portfolio. Compared with fourth quarter 2017, net charge-offs increased $7 million, reflecting a $6 million increase in commercial net charge-offs, and relatively stable results in retail as the impact of expected seasoning in unsecured portfolios was offset by improvement in auto. Fourth quarter 2018 net charge-offs of 29 basis points of average loans and leases compares with 30 basis points in third quarter 2018 and 28 basis points in fourth quarter 2017.

Allowance for loan and lease losses of $1.2 billion is stable compared with third quarter 2018 and fourth quarter 2017 levels, reflecting strong overall credit quality that helped offset reserves to fund year-over-year loan growth.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.06% as of December 31, 2018, which was stable compared with 1.08% as of September 30, 2018 and down modestly from 1.12% as of December 31, 2017.

The allowance for loan and lease losses to nonperforming loans and leases ratio of 156% as of December 31, 2018 compares to 149% as of September 30, 2018, and 142% as of December 31, 2017, reflecting the decrease in nonperforming loans.

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: Ellen A. Taylor - 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: (800) 230-1074, conference ID 443614

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 11:00 am ET on January 19 through

February 18, 2019. Please dial (800) 475-6701 and enter access code 443614. 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 $160.5 billion in assets as of December 31, 2018. Headquartered in Providence, Rhode Island, Citizens offers a broad range of retail and commercial banking products and services to individuals, small businesses, middle-market companies, large corporations and institutions. Citizens helps its customers reach their potential by listening to them and by understanding their needs in order to offer tailored advice, ideas and solutions. In Consumer Banking, Citizens provides an integrated experience that includes mobile and online banking, a 24/7 customer contact center and the convenience of approximately 2,900 ATMs and approximately 1,100 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 corporate, institutional and not-for-profit clients a full range of wholesale banking products and services, including lending and deposits, capital markets, treasury services, foreign exchange and interest rate products, and asset finance. More information is available at www.citizensbank.com or visit us on Twitter, LinkedIn or Facebook.

Key Performance Metrics and Non-GAAP Financial Measures and Reconciliations

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

Key Performance Metrics:

Our Management uses certain key performance metrics (KPMs) to gauge our progress against strategic and operational goals, as well as to compare our performance against peers. The KPMs are referred to in our Registration Statements on Form S-1 and our external financial reports filed with the Securities and Exchange Commission. The KPMs include:

• Return on average tangible common equity (ROTCE);
• Return on average total tangible assets (ROTA);
• Efficiency ratio;
• Operating leverage; and
• Common equity tier 1 capital ratio.

Established targets for the KPMs are based on Management-reporting results which are currently referred to by the Company as “Underlying” results. In historical periods, these results may have been referred to as "Adjusted" or "Adjusted/Underlying" results. We believe that Underlying results, which exclude notable items, provide the best representation of our underlying financial progress toward the KPMs as the results exclude items that our Management does not consider indicative of our on-going financial performance. We have consistently shown investors our KPMs on a Management-reporting basis since our initial public offering in September of 2014. KPMs that reflect Underlying results are considered non-GAAP financial measures.

Non-GAAP Financial Measures:

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

Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.