Citizens Financial Group, Inc.

Good morning, everyone, and welcome to the Citizens Financial Group fourth quarter and full year 2022 earnings conference call. My name is Keeley, 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 Kristen Silberberg, Executive Vice President, Investor Relations. Kristen, you may begin.

Thank you, Kelly. 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 fourth quarter and full-year results. Raymond Coughlin, head of consumer banking, and Donna McCree, head of commercial banking, are also here to provide additional colour. We will be referencing our fourth quarter and full-year earnings presentation located on our investor relations website. After the presentation, we will 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 are also referencing 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.

Okay, thanks, Kristen. And good morning, everyone. Thanks for joining our call today. We are pleased with the financial performance we delivered for the fourth quarter and the full year, and we feel well-positioned to navigate through an uncertain environment in 2023. We are playing strong defense with a robust balance sheet position and highly prudent credit risk appetite. At the same time, we continue to play disciplined offense with continuing investments in our growth initiatives. We are focused on building out a prudent, sustainable growth trajectory over the medium term, I'll comment briefly on the financial headlines and let John take you through the details. For the quarter, our underlying EPS was $1.32. Our return on tangible common equity was 19.4%, and the efficiency ratio was 54%. Sequential operating leverage was 1%, and sequential PPNR growth was 2.6%. Leading our performance was 2% sequential NAI growth, reflecting NIM expansion of five basis points to 3.3%, and relatively stable loans given the impact of a $900 million reduction in our auto portfolio. Growth was 1% X this impact. Deposits were solid with 1% sequential growth, and our LDR remained stable at 87%. Our fee businesses showed resilience and diversity, given a challenging environment, down about 1% sequentially. A number of M&A fees pushed into Q1, and mortgage results were softer than expected. We maintained stable expenses in the quarter, and credit metrics remained good. We boosted our allowance for credit loans. percent of loans, which compares with pro forma day one CECL levels of 1.30 percent. We restarted our share repurchase activity in Q4, buying $150 million of stock, and we ended the year with a set one ratio of 10 percent at the top of our targeted range. For full year 2022, we delivered underlying EPS of $4.84 and ROTCE of 16.4% as we captured the benefit of rising rates and our strengthened deposit base. The results handily exceeded our beginning of year guide, which we included in the appendix of the presentations. With respect to our guidance for 2023, we assume a slowdown in economic growth to 1% for the year, two early Fed rate hikes and a Q4 cut, and inflation getting below 3% by Q4. We project moderate loan growth, partially offset by continued runoff in our auto book of close to $3 billion. Overall, we see solid NII growth as NIM gradually rises to 3.4% over the year, roughly 8% growth in fees, given a rebound in capital markets fees over the course of the year. Solid expense discipline with core expense growth, X acquisition and FDIC impacts of 3.5% to 4%. We announced today our top eight program, which targets $100 million in run rate benefits, and about 80% of that is expense impact. Credit should be manageable with net charge-offs in the 30 to 35 basis point range, and we expect to build our ACL to 1.45% to 1.5% of loans. we expect to repurchase a meaningful amount of stock given strong profitability, modest loan growth, and limited expectation for acquisitions, with our set one ratio forecast near the high end of our 9.5% to 10% range. Capital return to shareholders should approach 100%, and yield to investors of our dividends plus capital return via repurchase could top 12%. So all in all, a very strong year of execution and delivery for all stakeholders by citizens in 2022. And we feel we are well positioned in 2023 to continue our journey towards becoming a top performing bank. We continue to make good progress in executing on our strategic initiatives across consumer, commercial, and the enterprise. We've transformed our deposit base and are reaping the benefits We've addressed our interest hedging to protect against lower rates through 2025. Given the improvement in our ROTCE over time, we are raising our medium-term target to 16% to 18% from 14% to 16%. We've stayed focused on positive operating leverage. We've captured the benefit of moving to a more normal rate environment. And we still have plenty of upside in our fee businesses as market conditions improve. Exciting times for citizens. I'd like to end my remarks by thanking our colleagues for rising to the occasion and delivering a great effort in 2022. We know we can count on you again in the new year. And with that, I'll turn it over to John.