Citizens Financial Group, Inc.

Good morning, everyone, and welcome to the Citizens Financial Group second quarter 2023 earnings conference call. My name is Alan, 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 Alan, 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 second quarter results. Brendan Coughlin, Head of Consumer Banking and Don McCree, Head of Commercial Banking are also here to provide additional colour. We will be referencing our second quarter 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 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. And with that, I'll hand over to you, Bruce.

Thanks, Kristen, and good morning, everyone. Thanks for joining our call today. The turbulent external environment continued in the second quarter, but we continued to navigate well and we delivered solid financial performance. In particular, we're pleased with the strong results we achieved around capital, liquidity, and funding. Our set-one ratio grew by 30 basis points to 10.3% in the quarter, and we were able to repurchase in excess of $250 million in stock. We grew spot deposits by 3%, or $5.5 billion, and our spot loan-to-deposit ratio improved to 85%. Our federal home loan bank borrowings dropped by $7 billion to $5 billion, and contingent liquidity grew by 20% to $79 billion. For the quarter, we posted underlying earnings per share of $1.04 and borrow TCE of 13.9%. NII was down 3%, reflecting higher funding costs, in line with our expectations. Managers' income grew 4%, slightly less than expected, as capital markets saw a few deals push to the third quarter. Expenses were broadly stable, as expected, and credit costs continued to be manageable. One of the highlights of the second quarter was the opportunity to secure a significant influx of talent largely from the First Republic platform to meaningfully augment our citizens private bank and wealth management business. While expense investments will lead revenues in 2023, we project the business to be accretive in 2024 and significantly profitable in the medium term. In our presentation this morning, we will highlight this initiative in more detail. And we'll also review several other compelling initiatives that we believe will lead to strong medium-term outperformance. Execution of these initiatives continues to be strong. We're setting up a non-core runoff portfolio as a centerpiece of intensified balance sheet optimization efforts. We expect around $9 billion of loan runoff, largely in auto, by the end of 2025. This capacity will be utilized to fund more strategic loan portfolios, to pay down high-cost debt, and to build cash and securities. In parallel, the private bank will grow loans over this period by $9 billion, which will be funded by $11 billion of incremental deposits. The net benefit of all of this is a better deployment of capital, along with positive impact on earnings per share, ROTCE, and liquidity. We've also included more detail on our CRE loan portfolio. Our general office reserve is now at 8%. While we continue to see increases in criticized assets and charge-offs in this particular portfolio, we believe losses are manageable and readily absorbed by reserves in our strong capital position. Looking forward, we anticipate that the environment, while stabilizing, will continue to be challenging. Our net interest margin will decline again in Q3 given higher funding costs. We expect our terminal beta to reach 49 to 50% at year end. Our fees should continue to grow sequentially, expenses will be well controlled, and credit should be broadly stable. We will further build our CET1 ratio while continuing to repurchase shares. Overall, we're holding an okay on current period performance with mid-teens ROTC in 2023, while making the investments to deliver a stronger franchise, attractive growth and returns, and a fortified balance sheet over the medium term. We continue to build a great bank, and we reign very excited about our future. Our capital strength and our attractive franchise position us to attract terrific talent and to take advantage of opportunities as they arise. With that, let me turn it over to John to take you through more of the financial details.