Citizens Financial Group, Inc.

Good morning, everyone, and welcome to the Citizens Financial Group first quarter 2022 earnings conference call. My name is Tawny, 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 Kristin Silverberg, Executive Vice President, Investor Relations. Kristin, you may begin.

Thank you, Tony. Good morning, everyone, and thank you for joining us. First this morning, our chairman and CEO, Bruce Van Saan, and CFO John Woods will provide an overview of our first quarter results. Brendan Coughlin, head of consumer banking, and Don McCree, head of commercial banking, are also here to provide additional colour. We'll be referencing our first quarter earnings presentation located on our investor relations website. After the presentation, we'll be happy to take questions. Our comments today will include forward-looking statements which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review on page two of the presentation. We also reference non-GAAP financial measures, so it's important to review our GAAP results on page three of the presentation and the reconciliations in the appendix. With that, I will hand over to you, Bruce.

Thanks, Kristen. Good morning, everyone, and thanks for joining our call today. There clearly have been changes in the external environment relative to what was expected coming into the year, along with significant volatility. We feel we've executed well in this environment and are positioned to perform well over the course of 2022. Among the highlights of the quarter, we had a successful conversion of the HSBC branch and online customers, which was then followed by closing the investor's acquisition on April 6th. We continue to take actions to position our balance sheet well for rising rates, and we've made further progress on our strategic initiatives, including our digital agenda and top seven programs. With respect to our financial results, we're off to a good start with underlying EPS of $1.07 and ROTCE of 13%. This is generally our softest quarter from a seasonal standpoint, given fewer days in the quarter and the impact of payroll taxes on expenses. Net interest income was up 2% sequentially, given 3% average loan growth and higher NIM, which more than offset a sizable drag from lower PPP loan forgiveness revenue and day count. We saw lower revenue in capital markets and mortgage, given the environment, though high volatility benefited our global markets hedging business. We maintain strong deal pipelines in capital markets and remain optimistic for a significant revenue pickup if markets stabilize. We've managed expenses well in the quarter, and turnover has normalized somewhat. Credit metrics are all excellent, and so far both our consumer and corporate customers are navigating well through the current challenges. Our balance sheet remains in great shape with a set one ratio of 9.7%. We have the capacity to grow loans, pursue fee-based bolt-on acquisitions, raise our dividend in the second half of the year, and buy back some stock. Our loan growth has picked up on the commercial side, and we plan to throttle back our growth in mortgage and auto a little, which will maintain an attractive LDR. I'd like to shift gears to emphasize a few key points that are topical for investors at the moment. First, and to be clear, we will benefit nicely from the accelerated path to higher rates. Our funding base is vastly improved from where it was entering the last rate up cycle. We have a 7% benefit from a 200 basis point gradual rise in rates, a 10 basis point cost of interest bearing deposits, and an 83% loan to deposit ratio. We project roughly $300 million in higher NII given the current curve, which annualizes to much more in 2023. This will more than offset roughly $100 million in lower fee income from the environment. John will take you through this in detail in his remarks. Second, while inflation pressures are real and the possibility of recession in 2023 has increased, we feel our credit risk position is in very good shape. We have maintained a super prime to high prime risk appetite in consumer, and over time we have migrated our credit exposure in commercial to bigger companies who have better credit profiles. As a result, our overall credit profile has improved over time. Our real-life and CCAR stress test results demonstrate that our credit profile is slightly better than middle of the super regional pack. and we have carefully assessed investors' credit books and loss history and remain confident in their positioning, which we will further harmonize over time. Lastly, with respect to acquisitions, I would like to highlight that our focus in 2022 is on integrating the acquisitions that we made last year and getting each of those off to a strong start, particularly our New York City metro area initiatives. We will still look for acquisitions in the wealth space, but we are a highly disciplined acquirer and have not been able to get much done as a result. With respect to Florida, we now have eight branches in the state, and job one is bringing them to network performance levels. There does not appear to be much to do that's attractive inorganically, and the likely path is that we will open several more wealth centers in additional cities down the road. In short, you can count on us to maintain the strong financial discipline we've exhibited since the IPO. All in all, we feel very good about how we've started the year and how we are positioned to navigate the challenging environment. Given the significant move in rates and the closing of the two bank acquisitions, we've provided detailed guidance in our earnings presentation to assist analysts and investors in updating their models. We continue our journey to building a great bank that can do ever more for our stakeholders. And with that, I'll turn it over to John.