Citizens Financial (CFG) 20 Jul 182018 Q2 Earnings call transcript

Good morning everyone, and welcome to the Citizens Financial Group Second Quarter 2018 Earnings Conference call. My name is Paul, and I'll be your operator today. [Operator Instructions] As a reminder, this event is being recorded.

Now I'll turn the call over to Ellen Taylor, Head of Investor Relations. Ellen, you may begin.

Paul, morning much, so you and everyone. good Thank us busy day. really appreciate another joining you We on

Our CEO, our Banking; of will things the start of and Chairman room John Head we're and out the CFO, and then Banking. Brad with Commercial call Don Bruce for Van today questions. McCree, by us to are Consumer reviewing going second Also results, and quarter open Saun; in Woods, Head Conner,

a today's remind may financial that you to today you And I'm results filings, also the and Form we've that in going we our So, materially And our with SEC press and I are information to we to it and expectations measures that to earnings utilize release, our Bruce. to provide will the provided addition supplement Web of including filings need release. which that, and over from statements, we can provide about cause our And today. subject presentation a comments to and those forward-looking of filed course investor.citizensbank.com. measures reconciliation also risks X-K in to GAAP non-GAAP in uncertainties, on hand factors include site our SEC financial differ at find and information

X% performance Year-on-year, loan and was and growth X% X.X% X%. operating X% very sequential Thanks, Good quarter of by We sheet expense commercial. strong deposit good average year-on-year. loan another We're paced and growth our strong growth morning by to thanks everyone, pleased for leverage deposit with was top management, growth Okay. report Ellen. for achieved and positive balance today. joining our good growth led which of call strong combined line in

capital our and to have We continue increase of offerings. our $X.XX per organic our to deliver expand Today target share. we fee-based loan is, to our growth, good XX% management able product announced attractive we common capital levels dividend to modest about size return shareholders, acquisitions the fund that to been strong and strategy, feel service in

on remain metrics. executive year-on-year, XXXX our so American our the XX.X%, Franklin impressive in by EPS which key acquisition second up to August. X.X% also in We close grew continues quarter, our ROTCE in track to one The improvement and early In to deliver strong certainly far Mortgage confident in outlook improved is surprise for our which XX%. a overlooked. performance not remain second-half but our to programs, had not V year-on-year, the that announced with ratio year, improved efficiency should something Today continue. is We every to expected we be strong TOP we since XX% our

Our management continuous operates of a with improvement. mindset team

approximately our benefit scores. expense These constantly delivering run of to the goes previous seeking with bank The programs by have that customer do in rising program both to run end rate operating satisfaction programs today better million customers. our We of of ways more the two-thirds leverage work and are the side. on been for announced XXX XXXX of coming our plus positive on to delivery consistent the key

to external achieve innovation. good on for and customers our continue We recognition with progress

heading to to laid that and playing deck. model, are leverage we do, slide operating playing the catch up but and from digital You can More out see direction. the we and in we've to feel in Suffice shifted to right offense say, defense leaning-forward data. embrace new work our now technologies, utilize

detail numbers in to with you more through turn So and over will John? that, John with it me CFO, some who color. you provide the Woods, let take our

interest year-over-year. XX% generated on net linked share, $X.XX average delivered again, quarter EPS loan run notable leverage X% the on X.X was quarter, XX% XXX driven items growth. Slide year. positive results which of We X% had we X% an for Thanks, by Net linked which was per Bruce, adjusting highlights and of Once I'll X. diluted of in operating some up prior million second or good morning of underlying the of year-over-year, up we through income start income and quarter basis X% everyone. and billion solid our up

basis Our margin minutes. growth a interest linked more quarter and increased basis points in net two delivered cover in detail year-over-year. in nice the I will fees, XX few points margin We basis which from up XXXX, included capital quarter fees. and market quarter up of on an X% came million, linked year-over-year, at which near the XXX in record and X% second underlying

XX.X% operating first last and quarter in revenue consistent leverage. and of compared the roughly the to in basis. continue second This robust with discipline in on improvement while XX%, maintaining expense a ratio, in drove which our strong X.X to on X.X% linked came make excellent results These came efficiency and delivering in year. in improvement reflect a which operating at XX.X% growth performance ROTCE, our quarter percentage at quarter year-over-year We progress underlying an nice resulting commitment strong

to know, few will TOP In future the phase I through As growth. of our which will and program, we contribute to revenue drive you funding while looking and a minutes, find return. walk us, you ways run always improve our opportunities for better to further are next efficiencies bank the investments

X% sheet NIM environment, attractive loans balance X NII. Despite Let's X% we NII a increase helped average linked which quarter to X% results. competitive cover with our continue us growth Slide up year-over-year, linked to a quarter drive and in go deliver very to

given Taking a LDR of in year-over-year, doubled in rate talent expectations, our in linked was loan currency look margin and late our reflects Market XXX the where grew of on improvements income where linked volume. product continue yields improvement towards fees. the loan over driven pipeline cost. quarter a year-over-year deposit in to sheet in non-interest fees transactions driven The Capital interest environment, XX.X%. efforts, XX% conditions quarter we in ended optimization were On we outlook the for second capability. the 'XX. and the first quarter, helped that quarter a non-interest our basis loan lower second by levels strong broadening revenue XX% our category. portfolio up in higher levels is quarter down linked FX and at record XX improvement Linked on up strong drive and spot up reflecting points rates modestly cost capital robust issued points syndication as basis. and The where basis investment made X% short return service the fees we basis funding trust higher than stable activity. senior and also effect XX with level. in Loan was our points, debt shift over quarter million quarter. fees basis, increased a a this first full-quarter the a benefited sale high increased, the X% activity over by a we our investment record and we mix products were trust able while end of net linked were rate Slide us level, activity March deposits by which closed hedging interest relatively rates X, quarter and seasonally higher the rise in the and of in reflecting number from remaining a underlying we balance period fees Note impact from the in up two and year-over-year this market, fees Our linked and be loan rate strong with quarter charges fee of quarter contributions and offsetting basis loan and robust. income in basis at XX for interest which line demand short-term increase in to drove quarter was categories and investments in on year-over-year, syndication, were nice compared pick-up points reflecting was quarter, and an improved quarter record X% FX on market interest leverage continue yields, The up in a QX QX from quarter to favorable and nearly and from more

well-controlled. salaries seasonal given costs $X more to reflecting million growth Linked to million contribution. efficiently. an services and $X work is bank $X Other were X, by strategic driven in quarter expense run million, higher, expenses tied expenses in Outside our the our Turning increase benefits. initiatives remain and the we're Slide advertising also to decrease and were down charitable doing higher

the expenses salaries were which are and focused efficiencies discipline. remain to and expenses outside Our doing up drive early August. including ways $X of services Mortgage to acquisition, to basis, job self-fund driven underlying to close Year-over-year X% we transaction good million Franklin related on We of about benefits growth investment in by an American our initiatives and continued higher on finding a included same in costs also finding expense, growth. expect

and Let's Slide discuss balance in move on X. sheet the

You by by driven education, lines continue business growth grew expand retail strength most grow can and Overall, mortgage, of X% of and year-over-year, core and sheet see we across our loans associated sheet optimization The end the initiatives. near leases $XXX the unsecured lower commercial quarter in million with were the sale balance return our our our X% average we NIM. quarter the of somewhat balance and linked commercial and side. loans of in impacted consumer to loans in commercial

X.X%, or the our For of end excluding this growth X.X% impact was the period sale. quarter, loan

continue loan Our continued along on our balance optimization pricing. discipline given improve to yields sheet with

asset during to from from rate higher environment with the the gradual quarter. to sensitivity rising versus X% We well-positioned remain rates to a last rate also quarter. benefit rising LIBOR X.X% benefited We

given has sensitivity environment. asset Our rising the naturally moderated rate

This reflecting points, part, points. basis that competition, asset along higher Total some a million tied continue of DDA. take cost total points, debt look first which the associated the our deposit on I'm basis deposit expansion included basis was of overall a XX with grow quarter. well-behaved, X. but XX with Year-over-year, up our $XXX senior basis long-term reflected very issuance shift of to points impact funding XX costs relatively to late compares four basis with cost and most yield funding cost seems costs we borrowed increased industry have funding This funds. deposit in points XX for the of rate. at the were pleased up impact and funds continued Let's the been to The Slide greater

Our overall rate cumulative XX%, deposits interest-bearing our now in are is expectations, and in line we remains given data where on cycle. the with

out diversification funding and contribute our this platform optimization launched Access, Citizen's year. to deposit to offerings in out to mail digital to And invest we are analytics making build side. continue our and product to to additional improve new targeting capabilities next and will our we and direct early cash of from Also, costs. the month, investments earlier management roll levels consumer We which commercial, in

raise through expect deposits $X year. to by the digital consumer We about billion of nationwide to channel of end direct the this

So to this of an equity. as is such a be complement We retail lending and strategy. will overall our highly-accretive relatively our it initiatives, small home finance, deposit finance, education, merchant part think excellent

are effect very whole the with We about customers deposit access of base. existing to excited our us deposit new platform our giving this set minimal on

net quarter XX The second of cover commercial quality, ago. points basis paired lower risk a Next, the tied be credit improved XX let's for Commercial XX million down the Slide basis is XX modest loans risk from The reflecting from the year seasonal net to and $XX continues second stable year. shift Overall the and net from a million recovery. $XX reflecting quarter continued linked with retail Retail rate relatively million quality loan, to improved the compared to a up book. points non-performing quarter, loan to charge-offs strong, quarter, included higher a basis losses prior this Provision charge-offs versus credit. build, improvement auto. primarily points mostly loan $X our mix first with net for growth. ratio for were which last profile both move in the credit reserve quarter, stable of of with benefited charge-off in quarter

modestly ratio leases strong higher XXX% compared and NPLs XX, quarter non-core first quarter in quality of quarter coverage portfolios overall year. improved in the loan ratio with total the ratio XXX% On XX.X%, our mix X.X%. decreased allowance the portfolio. a ended to and cover CETX We quarter the in XXX% NPL stable in and capital. The to Slide was in our has the increase we book, which second for from retail the of of loans first continued the XXXX, prior and to given reductions let's run-off As

total including returned part to billion, shareholders, in amount It's dividend. million noting returned This the including of plan, quarter our as CCAR also repurchased dividend. worth CCAR XXXX to we XXXX the was shares X.X $XXX million and $X.X window shareholders

increase to a which per non-objective XX% share to shareholders ability know, the in $X.XX CCAR. today includes up dividend we also XX% quarter XXXX dividend XXX share the announced plan, return per versus XXXX. repurchases. to in Overall have CCAR an in capital by billion of first and capital you up We to our million, to our is increase quarterly to or received the again XXXX plan the As $X.XX of we share, X.XX

Our attractive path to performance we over remains points to ratio our continue CETX ability least basis and planned cycle glide remain improving in financial our at confident by to reduce and to on shareholders. drive the track, return XX

to move Let's XX. on Slide

growth. delivered that us successfully allow investment efficiency have programs future continue self-fund to TOP and drive to Our

expected TOP $XXX XXXX. $XXX well have on the to now pre-tax We very million deliver end by are IV of initiative, to which million executed the

share We two-thirds V value approximately shareholders. today, to improvement initiative. million benefit our continuous our to to of program excited of our targets efficiency the by TOP XXXX new details with which program are focus also $XX $XXX and million to a end highlights the pre-tax of on This very tied delivering

see challenging On constantly we and to side, to even better, efficiency are ourselves opportunity. do we continue the further

service We of support transforming to focus our in branch an our model. shift will advisory to continue footprint on

We our improvement of are to by and the working ways also agile of simplify across working leveraging organization process bank. new more

customer simple work experiences. process journey's will and end-to-end customer efficiencies Our drive excellent with

analytics to enhance targeting data the on and On of product offerings improve the experience. our side, next-phase we customer the of our are efforts the embarking revenue

industry commercial And will building of to our where to our banking on are tied out work out income we to continue management We new continue committed attractive such a into fee our short, team capabilities. Dallas fully planning vertical. we the and successful and strong bond journey already balance On to of make to company In these value expansion us MSAs, shareholders. have deliver capabilities build customer underwriting allows and XX, have better, we on Houston, remains presence execution Page we are as are programs, our long-term highlights progressing against the our customers optimize serve in which slide initiative. of color how This progress the our the the stronger, sheet provided to against efforts generating to fee some making our our strategic full-service and we capability. investments

a our X.X% quarter. our impressive that some businesses making things wanted also Since focused against approached 'XX, remain are include end as We XX.X% our XX, On XX% performing bank. highlight has the we interesting can to top our of lower medium-term the as progress of we are going targets. Slide charges the to range from XX% becoming see on to on you and XQ ROTCE this of financial we ROTCE steady the

very to improved $X.XX. by that $X.XX strong a EPS over ratio percentage from XX%; timeframe has trajectory efficiency from well, continues on to up Our XX points XX% same as and

XX. we Slide this to is should of impact expect outlook Franklin which quarter the August. before in American third on point Let's early our outlook Mortgage, turn I that close to out

slide, from a X.XX%. little On the third of for the to linked the we around standalone basis, average talk On the impact about growth a I the we are bottom expect transaction. will produce expecting quarter loan of quarter

given a see also strength expecting in continue strength pipeline income, heading net non-interest the capital the modestly to quarter. to We in expand our modest linked to In quarter. we continued with expect into are margin third interest of increase market,

further operating non-interest improvement. with be in positive up third ratio expect We modestly leverage the and to efficiency expense quarter

expect end expect third our the And be CETX XX%. Franklin $XX LDR we including finally, quarter American XX.X% be and range Mortgage provision of to the to $XX impact the to to expense likely around expect a of ratio around we million. manage Additionally, in million to average

difficulty]. Mortgage XX, to Moving held [technical early American contribute transaction close about Slide we in XXX Franklin of about expect should for and August. to It sale, million the loans

to for million XX deliver quarter quarter. the third XXX expected origination of about about and end an million MSR servicing of with of also We the XX the million fees at

as XX the of fees cost expenses to in about quarter. expect excluding integration be in same range the million We

expect announced be impacted our against ability our we this our deal, how To you our the we sum XX, drive told points. ratio manage XX strong run to bank expense strategic initiatives quarter when results and to revenue base. CETX basis our As and we the about up on to carefully by demonstrate execute continue include to Slide we growth underlying

become to we top-performing remains positive as regional Our bank. outlook work a

Let it to me turn back Bruce.

some Okay. Thanks, it Paul, John. we open why for up don't questions?

Saun. you, Van Thank Mr.

question of [Operator ready And Partners. now of first O'Neill comes the with are We Instructions] Q&A Sandler line portion from call. the Siefers your the Scott for

line now Your is open.

Thank morning, Good guys. you.

Hi.

late et words, customer of your annualized sort apples kind average if [ph] a sale? of a I are is tic-tac X% the very of the been guidance, a the at loan it's change, state XQ but portfolio just been or the has little wondering there demand, steady quarter, guess other change subtle any First of or than there mind? just a cetera, that growth the change has sort expectation any just on question on a in John, third apples of to am appetite granted In I in function basis, X.XX% for lower XQ. we

offer build and And particularly start loans we to QX in coming doing we're think and industry we our kind but north of to sluggish I'll in peers as of off, of then good very hiring pipeline the commentary. John can the side. the where But maybe our be little a QX. strong trend geographic would a had line we're are, the Scott, and a the into to have originate at going We should able been which with ability end about Because our I we we very whole on of and of say I that Don some commercial expansion were sustain. ultimately up the was, feel verticals, industry.

the QX we just optimization pipelines continues impacts the to think good heading be XX the outlook in for -- sheet XX got and quarter sale into that probably of And commercial we outlook efforts. balance on very by did We've the I to part our the is points. side. positive basis QX, late that

the an quarter, market probably seasonal There So sluggish impact Consumer sale. would of a little in the impacted to our that by X% kind annualized or tied looking somewhat be at the absent QX a of in conditions being a rate business. you in so of has been usually is third pick finance up education first-half.

there. And pick-up expect a to see would so, of a we bit

As been auto have paying running prepaying that's we you and off. a know, HELOC the in as we market are down phenomena had and

for we so, growth, bit bit and very of loan a year-to-date a on on But about growth. the behind, behind basis had that a I tad a kind think are we And a if the headwind have little consumer on I of outlook the as feel side. overall, little good

made assumed up have for had on running into going NIM, another rate ahead we where hike have than it We we with the year.

pick-up high-end And little for on on for to full-year have I but from NIM, I you less there? full-year, a want moving so, said the of loan continues certainly the the more ball growth, well maybe really a the the NII John; to lot, outlook think the outlook. goalpost towards track little

on real and high-level maybe a consumer It's commercial. Yes. point

some a a So, bit with but attrition and XQ. looked that seen things have little be we to home auto pick-up as in equity, down out headwinds in and some balanced running the you mentioned

space strength the refi, and with unsecured We in some are looking in forward overall. mortgage,

steady pipelines the commercial, CRE lending XQ, the holding strong. good. holding looks in still and space. are both that solid a So in you After pipelines C&I mentioned And we see very as

good Bruce we across comparing, in pretty that are you how [ph], how the but are board, it. look gave we at about better. you looking either the are from perspective much overview, about you or line And we versus think So if feeling HA we are when

well executing that we think on are I front. So

So those would add. comments I would the only be

Okay.

you Don, have comment? any

see very good where a we not them on news for are it good And look confirm sheet I - us the fact continue manage pipeline just about total reflection the at is is just assets on balance No, sold sold return that about for good. the to of a the feel the which you far working better, that assets market we yield the is. will basis.

very a for was us. it sale So, attractive

Okay.

book would pursue Scott, that the growth. I where we And or point, is that that are throttle back think on we growth we just add either need cost all to last the calibrating or -- front Yes. funding we're fund back going of where the loan book do we have look we depending one the to loan at on go constantly deposits Do opportunities.

is us think of you is of And that fund it we going of peers, ROTCE lending have to be to growth accretive, sustain it going to our are pockets so going because been And our is at loan NIM growth, have still still calibration identified. what that high the some cost constant is we've be I ROTCE what the accretive? attractive to loan it's to end NIM that able expand have the expand, seeing

at the on I mortgage it's pop on the the detailed perfect grow Okay, but once if Granted impact color. the of one there then financial separate small, you. out? quarter? on third on the that's really you steady in and for accretion company sort after for Slide the information ask just one quarter, Or acquisition? third state all from can impact, quick we Thank And NII fee expense does the that is XX

Scott, question. good thanks, Yes,

the funding So we expense servicing exclude close once talked the side about in yes, operational on on reflects synergies we side, will the and what that the that against deal, category. that start synergies we executing on various the

-- mentioned accretive things would in we XH you that that modestly can think I So expect [ph]. we would

are talked X% that's our XXXX X% we that's seeing on so outlook [indiscernible] and there. the in synergies. And you And so in XXXX, about -- but

very terrific. much. All thank right, guys you Okay,

Thanks.

Pancari line Your ISI. with next comes of John Evercore the question from

now Your line open. is

morning. Good

Hi.

on idea loan you right is want the give color corporate? larger more Thanks. is now? on you can coming little it loan where And see of driving are growth that terms to if a us just loans really more commercial new just yields an then money to the give that the can commercial for types, books us the if in what also are Back

I across in really that tend we concentrated verticals mid-corp our board. our it's credit, slightly also to are the and be which some And of to mean larger it's So more and industry careful accounts so which mortgage market. on slightly is expansion quality. expansion being middle particular of tend be larger for the credit reason mortgage

So new to want as bigger we financial more companies be with are we in markets, dealing with flexibility. slightly

think And we don't the credit better amount aggressiveness actually mean fair companies. our funding also cross well book are and utilization our so selective it from highly our the of activity loan being up we where too into but seen are of yields have cross-sell, mortgage midsized have markets in little like. capital we are aren't would are well. return in amount seeing selective. existing capital, which competitive M&A includes of we market effect basis, coming a passing. seeing it's And decent originations at not oriented where is are I client the of is with yields But business. seeing And just indicative our a in are activities far I I of as on terms and particular held capability sell being We overly we management which it front thought. pretty terms M&A tax of of we yields, off situations are portfolio. have return cash working unattractive we way business through in look don't some say the extension, as we of a we we And overall a base. And our bit If

Okay.

loan coupon And that coming continue to just a are mid as can we little And front to the drive go capture space opportunities see as will book to in the base. into add you at that XXXs look able up so. or most market of cost that are in attractive the are yields Fed, by in bit the funding the very yield plus driven we're that and the middle new that, to from we

terms down Then as it, How given you in have level commercial are in everything Got the you where okay, and -- a are about to of from credit portfolios certain we that you thanks. know Where growth -- space loan overall. points here more thinking of you here? that about particularly are reserve the XXX little in particularly separately loss I bit you the going seen in and cycle? loan see do like the basis

I'll start been But just modestly can that's John think. and then you chime maybe I in. declining

in If of And have years been you go might ago, around it's back a couple it XXX–XXX. down XXX.

book I clean. very of think there is back is credit a number things the that Obviously, very, play.

far we remix credit areas in in expand where side offs of dodgier a our the will then on loans that's and so if on really terms as consumer legacy run you loans factor. And and appetite. we're pristine And -- risk

overall lower requires also reserve remixing that think levels. I

risk And credit really of point. this credit feel the appetite, a in cycle. good levels reflection are about are of so terms where our we where we in those I we at And think it's

I they Yes, just there you would out are will I really what works the… in put when think are tied And us more in the that mean now where what on would how how accounting of that's current the in all add, cycle the we works we allow being just rates looking wouldn't charge to, through doing. things are XXs, at much But and lower cycle. where that's we the than the be look are the of loss imagine likely we at see are offs we where are accounting end to model I think terms really which we

had in a million we X we billed offs. provision quarter Two reserves. -- quarters row are We building charge over this

we're in I overall of up netting credit keeping So not results of that think with allowance. that's such but backlog to have on the some we good loan much that increase growth,

mentioned is in Bruce a driver, the Yes, going are at heading front we're we that's come seeing mix -- shift quality just that books and that stuff the back. better so

Thank it. got Okay, you.

Your UBS. of with next question comes Saul from the line Martinez

Your now line open. is

do a Hi, questions, first, of think about bps? us sense I glide mentioned a in the there? beta the is the good interesting still can you can been -- your But on progresses, you Where XX incremental of up also cumulative later bearing how rate morning everybody. the do sequentially, at beta And go about both but hikes? little of if where talk path to XX relatively look you cycle for think bit deposit you just terms just give as you beta you cumulative can about Couple think costs expectations the low. that up

and take ahead go I'll that.

I mean, we XX points up deposit cost from bearing. had basis yes, interesting So

I is to making drive many in to have we that are DDA. points. that's very important deposit And add been growth which this basis and do. solid to that be DDA the in than DDA you continue growth really have it's the been include space environment all-in really our proud when in cost think investments to been better able really And able to XX really of dramatic grow was we

So that's the we in. position are

around grow DDA the to continue XX. to interesting is you some Cumulative indicated. which offset will see cost going bearing We opportunities beta as forward

in the sequentially I more betas, not XXs. you the being window the hikes either get is low of we time there September year end by even think out by year get the say, still XXs the we you ending on the getting look that may you betas to could second that If will of XX% in year one get year, XX you depends think cumulative one, least the least you or getting in see get, a really right? betas, the level the that the us by could terms of into the low but sense be at hike see And many listen, or time of it of the half you more into get who the sequential in end second and the November. we to will at driven

an helping you, but NIM optimization shift, which of a the the hike is betas in in Obviously, the rates point sheet terms there you that or though neutral? at sensitivity have the incremental asset becomes beta mix balance

Yes, to remember deposit base, betas to are at in think that got around bearing When equity adjust including that that the loan needs about loan the on just think non-interest all and you continue you XX% our funding about to level. hold something about side, to level.

quite growth and So that deposit loan and that and the incremental away effect financial even really make mentioned. is XX%, environment, should into of at looking I in incremental from and of beta month-to-month the basis, grow be kind out that deposit the don't it of deposit that accretive and betas beta we're But continues decisions that into a so on to cost to we constantly useful effective quarter-to-quarter, XX% prudent because we scared be monitor are I that think we against regard. other XX%,

to I and that. would just add Yes,

pretty gradual we much So hikes, look asset XXX overall held you a around basis response in points at level. the if we in that to X% sensitivity published

their is to -- peer tad is And I'd I continues say as and job point under that. of that and allowing group, still is it group align flat we're doing about dynamic that NIM accretion you know, a the actually growing the their now to speaks in you deposit deposits think up, on for you you Fed at flow to look peer and hike. could shrinking when the a think LDR who right good we're draw equation on X%, who I deposits, our kind is if actually super-regional but darn terms costs, John's deposits of regression who

to all growing got because have growth. And actually and we a it we're to And the loan because have well very we're higher have so deposit we deposits going in that really have interest-bearing so, we we're NIM that's under because and good cost, view. our our expanding, focus, we've in managing ROTCE calibration growth slightly my expanding,

lot and XX Okay, to specifically with this funds LIBOR that's commercial, out and guess the the think did for I the quarter, bips and yields relative up I blowing much a asset how hikes? I helpful. think commercial how asset follow-up yields yields side, we incremental if loan And help Fed about could on plus should XX were just loan

helps, that mean I Yes, right.

XX-some points get basis we help. mean I and that's of a So bit

too. though last That was there quarter

kind QX moves, I have you've both relatively of been quarter basis, and from on QX that's that it's LIBOR So neutral so think to anticipating because a sequential had the the they phenomenon.

They do, yes.

quarter-over-quarter, stronger quarter. phenomenon. phenomenon So second was months little in Bruce to the three quarter than LIBOR and really first tightening similar XQ is of but And you bit, saw XQ exactly LIBOR one month right kind a

post get the we're swap continue you the In our XQ, of the to basis just are have from As but even you consumer saw And asset with rate, between balanced driving it the that be to about, of of it the drive in adjusted C&I XX% commercial. - lag be XX% effect talk more going the still side when with more other get in thing continues other benefits on don't yield you the assets asset consumer take to that, XQ, floating. will to we it are from QX, I into head really will flipside growth, when But balanced and block. we about improvement the house.

Okay.

final impact one then as to opposed… should the XX, American, a guess for think and guidance that Just is that we as Franklin XX two-month that of quickie, on I

Yes, roughly yes.

right, All you. thank

line of Your Usdin next question from comes with Ken the Jefferies.

now line open. is Your

guys. morning, Good Hi.

terms I and it, ton the help perception into outcome, about dialogs Thanks. the your because can ability written would For press of models, but to Bruce and have and -- wondering trying to outlook, a do you hopefully your plenty better return guys of you was and that of around get you I the I think is capital helpful in be the a direction can just it to you discontent the obviously of so if wondering CCAR own the just or about John, in you understand us you're about disconnect I your in guys just and outcome, release what the had what was understand. to the about continue terms for just outcome

this private they CCAR to model we think model the get elements I'll their approach think where after kind a Yes, is average when move so the to sure, sense but has -- the they away you right Ken. from of industry cycle Fed, having I in XXXX think the we're you more pick of an data conversation it. the built the PPNR to And as we but a changed from that that in data great up headline firm-specific of it approach. with And Fed tell recession, which

of owned super-regional to accretive. had benefit think sheets, some balance Citizens able you peers foreign cases a in were was government, uniquely by most the and about of TARP super-regional funding the you dues, when acquisitions the So by levels, TARP the they their if peers, grow shrink were the and because quite U.K. so capital parent eligible sheet firsthand. government, for that I to owned balance but needed its didn't too XX% and also there, will, because its was get to know I TARP needed saw raise and I that not funding,

the peers on which up, so, expense depletes the think so banking, XXX; you an to period. you in direction, we to really went other with goes was actually and your PPNR. you your XXX over Citizens XXX base, to five-year balance expense know, the by XX% up end average were overall impact peak down XXX from trough, And sheet I shrunk a shrink, ratio fixed When your peer as

assume Fed through going does the sheet it's CCAR shrink when most at set up is the of to get results going you set assume who to history. get a then they has that don't unique And for of picking going you're to they look their do that they actually model, how you're if your you're for banks; going one run to data, us balance unique grow, that when So stress. forecast results

to the inconsistency what's data sheet PPNR have their they're And a on then you the going balance happen for picking and up between so, to the model. assumption total that

We've willing make So and and is because that's them to clear when we're Fed actually this version that consider had the the putting adjustments. been of we're hopeful been to short we argument the in logical presented have very past, it. a those dialog, they've continuing forth, and think

hopeful that that we're So resonate. will

asset there you're current you, question focus the changes. that. understand may of of of sheet, you Understood, on and about you one John, mix the improvement okay, that lot balance talked improvement tangible in on we have Appreciate thanks us for lot right efficiency the do have on can the you results? side? that. yet an in the left are much more things the working for getting But obviously terms any of see yield not how that a You help the where examples of be still side

Yes, absolutely.

tend to the and We all a So, out lower that from finance on book emerging of and bit think the space side, some about we have up that we lower within all large got of there opportunities maybe that bit student other risk return asset on C&I. in book an and asset categories. fair relatively and the capital missed auto there. come a reallocating profile return it a in book a finance the as We've in than non-core

only is see you have indicative million opportunity, or and fix also formality have one categories transform increasing see and and maybe to velocity would the to bit to bottom be did return made but the we into it So two. of and able and themselves in we that balance basically not stuff I rotate may categories, really with behavior that mention in kind takes that's there's relationships level so, quartile can't a continue with and across that of reallocating where out and benefits we quarters; the within investments loan saw $XXX the that want to two different the XQ. we you go, opportunities embarked fair of those this sheet, more or exiting an still capital that of fully to the them will coming over next also upon you in of and loan years what we year rotating relationships of

fair a still to bit go front. there's think let I on So that

Got it.

a thanks Okay, lot.

next comes Morgan of Zerbe Stanley. from Your with question line Ken

Your line is now open.

meaning no I quarters is about of guidance, I growth I full-year in had superseded targets very are a when of guidance, X.X. appreciate a growth quarter Great, fee guess, those was first think Thanks. given by couple ago? question longer over gave third you should loan it like helpful, certainly quarters the third think just but we few the the to thanks. on Good that specifically ago, broader terms guidance we the full-year rely and X.X Are quarter, targets X.X you the morning.

in every will it's that full-year comment go, policy. you you will quarterly And of but in the at annual we updates updating business say, about beginning year, the and are quarter. then, of guidance that guidance we We'd not guidance around will annual Ken, we as give the the the give

range. Franklin guidance on certainly expenses, do we if growth we initially are assumed. and indicated You better can I how out, the not quarter to project depends NII, there be include based bank, earlier if the in to the XQ, are strong, going goalpost except, back the you two end little the the the I it's are little we XQ come is the and have On you hope us than of and question so left than beat we top the range, of at very analysts an goalpost you detailed out, probably you on the than up to is of look I the think line. on are that think I but roadmap performing, have kind as the you we assumed, would think less loan all had in but mentioned ranged. that left little in to you'd that NIM want But I can expansions trends NII, tracking to think -- range. for On a range fees, a to get tank quarters I towards a the as I with put on fourth think initially of we I a be you lighter maybe to that It and light American what's to got projections really the and got puzzles in on just us come

then I PPNR a a think that had be cost. that together, find at So gave I the where the year. when is think you we going our you credit to improvement going guidance stir solid of we that's strong have the to beginning are And -- consistent with

the on beginning we to basis good credit the of feel and a against ability the at both a So guidance year about deliver cost. our PPNR on

Citizens That's think And there, helpful. your forward? terms just does deposits. the Access are sensitivity come deposits, we Citizens at change? growth How normal great. higher branch-driven in your going your about about Okay, then, presumably than of and How they Access. When somewhat you asset cost feel

that go I ahead Yes, one. take and will

sources, So, less drive our just year, context. know, here than that's performing This base. diversification we nice a as is are but you this X% what we you trying about, launched thing, by of deposit the $X to when of just end think for approximately the billion

it keep to want context. we So in

and and know to about innovative excited our customer think a promo We approaches little you still to on it's it's great lower deposit respect to that test less as balance it's We platform of wholesale but the cost, X% commercial launch a when we awareness than drive With are base. about higher consumer and are our still than to think large -- the it. experience, marginal it's but nevertheless learn borrowings launched rates and consideration, it typically sheet. to

are out be we then the are branch-based when the can and majority these desirable as able activity, have what a later the driving be well. ability a Even those in even we around on of rates from And of it we cannibalization we pricing X% the Citizens depositors would to even think give to that so lag here rate, but margins sheet, balance on on have you what do, you Access be I than ways, from really on of higher important launch unique will that at commercial financially and occurs be numbers which the so we that -- qualitatively, going perspective, savings to to typically promotional just at excess large and here. are consider of that's couple promotional in our it's very the deposits

strategic the we we it on the box fronts, it both So of financial that aspects balance are it of in it are on keeping the the both excited really and sheet. about aspects

And had whole a would I a us add, to access gives we haven't and base customer that I before. think to customer set just access it new John,

are We the into launch. days XX

We are we taken about deposits optimistic have the progress made. states. all already in And XX we've

good So sign new we a customers. reaching are that it's

thank Great, right. All you.

Kevin Barker the of line Piper Jaffray. Next question with comes from

Your open. line is now

or of given growth grow, three a four the how morning. Could over at overall you much projections structure Access, you and it the Citizens next your of or Good deposit or talk base? that for over years XXXX-XXXX, least your portion about to expect be maybe

wouldn't excited and right, it you mean, this I see at forward, would nimble deposits very total this, I'd high would going imagine into that I base of we we have single-digit guess head. and percentages as couple out things say five But But the where over of as I out our want years maybe is thing how of or and won't deposit say relates expectation the we about get going goes, us, it's to This be of Yes, will be so the to hard we where the this remain to I you we mean, a a launched to highest ten, of out but future. maybe to I into gate. learn. are we this it part going next huge single-digits, the look said, to are good like a would test are new -- for but

base this to as and through do replace funding gain the you the customers new these do view alternative view in alternative an an this new wholesale And as order like funding? assets to or typical you funding Okay. grow to branch deposit source potentially customers,

but me funding. funding an some be I let source of contrasted can dollars is alternative Well, cost that, with marginal and it that of higher our that would take say compared

pricing broader new this consumer versus our pockets side, we marginal on CD money customers versus So is the commercial the cost compare and more those pooled what institutions that you have bank, on this or side, using like look would into channel. Certainly money the from contrast funds you be, cost and could much promo certainly much financial diffuse that to borrowings on to a existing from offering, basis. the that of of going kind that attract government which could

so it. products test of said, offer enhancing digital Having learn and just important that's quite And view can digitally I what how services principally kind Brad our said additional and capabilities, the customers. and it's we that, think and we these would then to

We goes. example, in, see products have maybe be some very where it attractive lending we customers for but those will interested would

very you much. Thank Okay.

next of O'Connor The Deutsche the from question with Matt Bank. is line

Your is now open. line

hoping you elaborate some that feel of just Good got scale then, though? in was an appetite and of side morning. or the want you've servicing could revenue the you if on the mortgage, on fee is the that you like there, specifically opportunities deals, for I do area

been biggest holes really have scale, here fee start areas know, you haven't I we think the the I consumer the would and say, had the on where activities. side

mortgage. first The was

I really what think needed. this addressed feel we we

need think don't there in I do we mortgage. more is really So to

we The second the swat to been we've a our and area distribute terms has trusted through and our advisor branches how become in base. much right business been of of model wealth, organically client that getting building broader

where We we that others. have don't and are pyramid, highest really that some marketplace say competes end banking very offer with to great But high-end at market of in the capability middle I into would missing services the wealthy cross-sell well and over commercial some families. the we opportunities companies some the

an And to get financial get bigger so, can look a other things do that us faster that and organically. might more breadth be an doing footprint than or the us it area for example consultant potentially us where for acquisition we in

bolt-on side, on the the and customer cover some so to our of on side. have boutiques platform. based that to size find off if seek expand certain on higher opportunity verticals, did way We maybe So I platform I'd the still build we we base we industry areas that, consumer might say those other or boutique. will the commercial be that M&A that to we think can the could that organically, and

innovation of taking I opportunities and that's think the there. potentially payment are around the place space some there

diligence, our acquisitions, muscle due Some of could open could good our well. through for things was now have, to things we we be those of didn't But haven't the are we but I feeling XXXX opportunities think That capability and bank, that of source last to to need, deals Charter I FinTech, opportunity the them deal. about guess the putting we one these those we've good X was potentially kind execute it year, some done didn't we prior in. and source now a I capability years, about things think inside to was got feel deal XX

think with down going strategic modest I the need and have them. a straight they're size, in to be good financials associated fairway fit

that's Okay, you. Thank helpful.

next Erika with Najarian of Bank Your line of question from is America.

open. now is line Your

I difference ratio? have significant there and was what amount the ratio even a model at in is in Fed Bruce co-run XX.X%, Ken just been impressive flexibility the of take lining that of terms you a stunning XXX your good I'm and over not of see CETX on the look ROTCE an and basis the basis points to given had organic line really of flat to improvement wondering of kind to do his just questions, near-term that is with the questioning, mentioned improvement in terms what's the like CETX Yes, you down really if in modeling, difference follow-up morning. few between model the essentially it's do

a Yes. have of fair Well, we still I think amount flexibility.

-- have into plenty you American is we I which year, So of we year down to SCB resolve path. resolved, issue, at go we even basis moving think deal. don't keep likely bring to our Franklin down when rolling the if we're flexibility look XX hadn't think points if to about the effect, to still on if then we glide XX And think this you that targeting to next I this

and Stanley to just don't in doesn't it's impact of think stress have anybody. stress a we're terms with to a perception results sense Goldman this to the at see perform how negative We ourselves feel I published of So make losses, huge Morgan any and Sachs, really better, going much to route in I which see point. these

and you have at it. modeling. pack is so it's us quite It's good a same shouldn't there And standpoint, the from that with ROTCE PPNR I kind after the pack into have be all look the impacts Fed at is when apparent reputational that adjusted back think converging to now the and of

get first to reputation and thing because I fixed, the results just I published. those help it is like it's it think wrong, So doesn't have to our

we we I room but think if through we are down and the path that comfortable CCAR with we're a then a that we'll year that flexibility more create feel that next with, on, and would be the road cycle could to we'll it it, the it need continue, some execute work see little will that. after glide where

points have subsequent hike calls Bill sure we've continued as that Got question believe XX DDA wanted Citizens heard impacted you, indicated the CFOs that that it. for conference And will growth a previous. the hearing think going right asset of the we're net just follow-up And that earnings make rate optimization you I John, each in through NIM what the less was season, be asking of basis this side buck on the is on trend? and you is I that to that because that other to

I that data just we the I and say increase earlier; all each in. would basis that -- one in equal definitely it Fed of and increase to drive does that, was agree Erika, sequential points wouldn't make XX sure would appear say I would in there

where that an that. be also not. growing in up to offer just most that environment We DDA that's we agree are with clear So happen would we

DDA. an fully extent that's somewhat not having grow, of don't So, but offsetting that betas the but we on the impact if fact helping and betas that others, of the like the grow growth a be and that reversing net sequential otherwise we in in sequential to experience it's would basis, impact, case will will not

it. you. Got Thank

Wedbush line next Your Securities. Winter comes the of Peter question from with

Your line is now open.

morning. Good

Hi.

of curious about still from a are we've having just that banks environment, heard estate number earnings I'm you wondering commercial and lending what commercial just good growth, underwriting, more loosening I given pricing and on estate very probably real guys cautious was the of this seeing. real getting you're

at selective terms see Yes, being more we we more definitely cautious, being and where getting margin conditions also are stretched. the and

haven't deterioration, We price bit and structure, much in price of little but and disciplined. in seen in that we a are movement move terms of staying we leverage have seen

estate some other of we you're seeing book, funding. growth real thing our have large a which is that construction in The is

right on ago unfunded onto transactions up now. which standpoint have So funding it's sheet we in that several balance the put place are years construction

the funding growth would on we it the growth think a our side bit, moderate asset say So will I on necessarily that little the wouldn't but mean a effect. on origination will side moderate

some Thanks. you just And follow-up take talk flattening offset about yield bit could a could and you question, that on your of pressure? the steps curve of a little to the impact margin, just there are

you the a one. to yield I'm our non-occurred. would this way end area is give flattening case, exposure that and That short for be But can the opportunity sense we of what as a the cost XX% we're is that when to is. think take curve, about that I think Yes, there otherwise that about And have then curve. going

increase that So rate. we about we the spoke in assumes that got parallel X.X% shift earlier, asset sensitivity number

an to off to gravity you long hard end the on So on of lot defense and to continue Fed guess the of get of would and long long end, certainly the end. end to that we where the to don't well. majority but that increase move, that I drives fight I the net short note maintain and in really the sensitive half XX% the lending margin to interest say end really continues exposure yield a our environment we are It's when and exposure, that's the drive best curve, C&I short remains

Thanks.

Cassidy with from question comes your And next Markets. RBC Capital Gerard

now Your line open. is

on had possibly you've guys as to Bruce, CCAR you the Good soon year. be talked the about you. morning. discussions if Thank you CCAR following and next Obviously Dodd-Frank, the year reform falling the the not as with a Fed. with will

it's do thinking will Aside that? differently the behaved be quicker, your able back give are you think, guys what's in more to you capital through on news what you or you having to go not the from process the headline, thinking to going anymore, be how will formal not obvious maybe

I just other think is bank Well, me stress testing very embedded I'd emphasize in a say that valuable and and -- exercise, super-regional. our every it's let

We it's and have our appetite it tied our risk basically framework, strategies. built into to

make we test making in we decisions through capital, wise ensure to decisions. when So of we're run our our stress that we're allocating terms where it

to make still valuable out Gerard, terms be doing you to the the want of of exercise stress quite because point in that testing public is you're if how running first off, that fall they're just So you're going bank.

Correct.

effort we're just how of gain if have you terms public see going we're examiners to a think exercises, think but time want them, doing might and local present you and that to not be maybe up how effort in in things on I are I to teams exercise we'll savings. little some back still time have those our package and it of who bit

to up mother do industries to companies way the and kind so we to go that's impact decisions, I and growth I today. the bit. assumed." little we some go great would loan once-a-year start and regains that I think That thing to you where probably stock, that normal of over not resubmission, normal be control capital having those the team neutralize you And look may say, simply to of growth, is is back comes can a exercise able at forward I building the go a I forecast thing more think having in the sure that loan have it's have the making X% have I can operate whole you'd and exercise. so management to gain full to a the capital not buy "Okay, you're example you for more through just little if big that loan to if going don't growth a not that my through be X%, flexibility the

still you of don't even some the attributes maybe desirable back but be the get near-term if assigned get SCB would would but the as flexibility we Gerard, flexibility test you out even we flexibility lot stress in Bruce really just perspective you the would get so And earlier, and annual test some would intriguing you the of the has to SCB out you be not mentioned may get itself. entirely, of if it before most, have of factor add the all the out from even even get of a regime, forget uncertainty that, to

and from I'm guys good. follow-up, guys you Very new; as strategy, will brand are national you just your more and footprint, your they both with will it's out that changes think this just have encouraged one your in you or versus do your tackling hopefully are a benefit Citizen's in which digital that business be coming. quarrel all just Chairman's blocking the know more very Vice a really day-to-day -- competitive, businesses, on I thinking, very And rolled competitive? Access, week this physical a competitive it your is speech obviously you're view do guys in competitive you footprint,

off start can frankly and maybe will add. Brad I

at which range pricing talking which have and for recover offers online branch our is at at about we're those activities, in in you look that with seem a the when of XXX end about physical footprint going it, savings, I you XXX, to with no low to points both at competitive. even very plan when associated that as bank be they cost earlier and have mean basis all out physical competitors you legacy on standpoint, TOP seeing the bank online footprint, well. to think of branch think of the I businesses the the being XXX call around direct

terms Brad. one the competition pretty stiff is where elaborate experience, over customer have about to pick just spots. believe we've the of we but And We best we both done customer experiences differentiating the well there, we that's and that, out to I got of growth of we've level and places. in turn funds, I'll it So being how on clear think that and invest in can target our Brad

is think different just very both a They're completely they're I competitive; right. they're just I stress can't absolutely different, John, customer segment. right, different. you're it that enough

have understand So is different you bank. customer direct customer. It's really that's to highly using It the the a competitive.

we and sophisticated think with exceptional, analytics capability that think ways very and experience, at ours the customer reaching well. you as You win And which win and good we data having customers. on is of we're

can we competitive we is more places, both [technical equally think but in I think they're So win of in which competitive difficulty]. terms

one you of of was did When what customer it percentage before on your what guys that rate? customers product products, your purchase your analysis because of launched to choose conclusion to if work is driven your you it, and your they the percentage is rate-driven, of just what

me because that research are not our answer us that bit on online. and they what you digitally direct the is savvy rate-driven, they're sure Yes, let can I I'm of differently, shop banks a tell percentage little tell what who -- did use the customers

and no the fees, expect expect really and course simple rate an launched is certainly of a has is direct there the experience. that, much to a of a but lower low that cost element very operate. extremely simple with experience bank of So We've they direct bank fees they

so… And

account an You can open under…

You account five can open and fund less an than in minutes.

simple I really a are is what experience. are customer. sensitive, rate looking they So again, but They think for it's a different

it want our you so And footprint, Gerard, try in I out. to think you're might

account. to Well, open an have you

Absolutely, I will and much so I'll you report back. Thank guys.

turn there to Saun the And no are queue. further And I'll questions in over for Van it that, Mr. remarks. with closing

Thanks dialing appreciate support. today. great. certainly your and interest your everyone again in We Okay, for

a outlook we positive and for execute balance day. a great We maintain and continue have to well, Thanks the XXXX. again, of

today's for Thank conference concludes you call. participation. your That

now disconnect. may You