Citizens Financial Group, Inc.

Good morning, everyone, and welcome to the Citizens Financial Group second quarter 2020 earnings conference call. My name is Perky, and I'll be your operator today. Currently, all participants are in a listen-only mode. Following the presentation, we will conduct a brief question and answer session. As a reminder, this event is being recorded. Now I'll turn the call over to Doug Levy, Senior Vice President, Investor Relations, Doug, you may begin.

Thank you, Perky. Good morning. We're really pleased to have you join us. First this morning, our Chairman and CEO, Bruce Sanson, and CFO, John Woods, will provide an overview of our results and will reference our presentation, which you can find at investor.citizensbank.com. Then we'll be happy to take questions. Brendan Coughlin, Head of Consumer Banking, and Don McCree, Head of Commercial Banking, are also here to provide color. Our comments today will include forward-looking statements which are subject to risks and uncertainties, and you should review the factors on page two of the presentation that may cause our results to differ materially from expectations. We also use non-GAAP financial measures, so it's important to review our GAAP results on page three and use the information about these measures and their reconciliation to GAAP in the appendix. And with that, I'll hand it over to Bruce.

Thank you. Good morning, everyone, and thanks for joining our call. The second quarter posed unprecedented challenges given the impacts from the coronavirus and widespread destruction to people's lives and the economy. Once again, I am pleased that Citizens is rising to the occasion and delivering well for all stakeholders. We are taking great care of customers and colleagues while posting strong results that demonstrate the diversification and resilience of our business model. We also announced further commitments to diversity and inclusion, along with initiatives to promote racial equity and social justice. Our financial performance in the second quarter featured tremendous revenue generation and strong profitability in our mortgage business. We made an important investment in acquiring Franklin American Mortgage Company in May 2018 in order to gain scale and diversify origination channels in the business. In addition, we've made investments in talent, customer experience, and in digitizing and streamlining the business, which has positioned us well to capture the market opportunities we've seen since the middle of last year. These strong results have been a ballast to Windward during the low-rate environment and disruptions arising from the pandemic. Overall, our fees were up 28% year-on-year and 19% sequential quarter. With stable net interest income, total revenue was up 7% year-on-year and 6% sequential quarter. We did a good job on expenses, which resulted in 5.9% positive operating leverage year-on-year, a 54.9% underlying efficiency ratio, and PPNR growth of 15% year-on-year. And if you plug in charge-offs as our credit cost in Q2, we got a record quarterly earnings of $1.14. As expected, however, we again built our credit reserves under CECL, given a deterioration in the macroeconomic conditions since the close of the first quarter. Our ACL to loans ratio is now 2.01%, and that's 2.09% excluding PPP loans. In addition, we are selling a long-duration student loan portfolio, which freed up additional reserves for reallocation. We feel we have good coverage now of the credit risks in both the consumer and commercial portfolios, though uncertainty on the path of economic recovery remains. We have updated the granular information on credit portfolios, including some additional metrics in the appendix to our earnings presentation. So take a look. The strong PPR generation and reduction in commercial line draws during the quarter helped improve our set one ratio to 9.6%. which is up from 9.4% in the first quarter. We had a very liquid balance sheet during the quarter with average deposit growth of 12% sequential quarter, 8% spot. Our spot LDR at quarter end was 87.5% or 84.5% excluding PPP loans. So overall, we have a very strong capital liquidity and funding position that allows us to use our balance sheet in support of our customers. We continue to track well on all of our key strategic initiatives for 2020, and we've been working on refreshing our strategy to incorporate key trends and learnings from the crisis. We aim to take advantage of some of the opportunities we see to come out of the crisis well-positioned for future growth. I hope you and your families are coping with the current challenges and remain healthy and safe. With that, let me turn it over to John for a thorough review of our financials.