Citizens Financial (CFG) 19 Jul 222022 Q2 Earnings call transcript

Good morning, everyone, and welcome to the Citizens Financial Group Second Quarter 2022 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.

call Kristin the President, Executive turn Relations. Investor I'll over Silberberg, to Vice Now begin. may you Kristin,

Thank morning, Alan. you, Good joining you us. for everyone, and thank

Saun; Don will to morning, CFO, Brendan our also Coughlin, this our here Consumer and provide of results. Bruce First, Banking; Commercial of and are Chairman second quarter color. John Head an provide Van Woods, Head overview McCree, of additional CEO, and Banking,

the our referencing be earnings second we Investor to Relations happy our After on will We presentation take website. quarter presentation, be will located questions.

risks statements, These Our results may uncertainties will the your to include comments Page our outlined are today which forward-looking are cause on expectations. subject to of review and differ for from materially X that presentation.

measures, GAAP review financial Bruce. over the important also appendix. in of X hand reference results Page and that, so our the presentation reconciliations to With the non-GAAP to it's will on I We

good was City the and and Kristin, efforts. on morning, closing our our Investors for going joining with integration focus QX York New lot Thanks, in commencing a today. a Thanks There Metro acquisition everyone. call on

good strong a addition, on of on our In move in put rein through results. a progress while short management. The as financial rate very Fed's interest that rates and tightening made quantitative all joint is to higher management funding liquidity we our and as capital, inflation position the spotlight well posting news good fronts

and XX.X%. our excluding the That's XX.X% jump growth interest significant margin sequential impact and XX was results X% was points. underlying that's quarter of Our interest strong operating which quarter the was basis, PPNR acquisitions, basis jumped spot $X.XX, loan reached these our Driving the as ex-acquisitions an income X% a EPS ex-acquisitions, for in is sequential net Positive X.X%, X% net XX%, XX%. was XX%. underlying growth of on first up was and ROTCE that's from leverage

in and like utilization us in be a in portfolios We opportunity to are selective pickup commercial more mortgage the afforded auto. which consumer seeing line strong has returning lower

period-end X%. were up deposit was as good Our performance deposits, ex-acquisitions,

ex-acquisitions, to it an revenue, Our fees quarter, were in though and volatility our all-time relatively diversity benefited up derivative check of kept up high. excellent. revenue Wealth job was expenses our hit nicely Higher markets FX capital resilient, and in mortgage product fee We revenue to streams. which credit usual continues the given the continued did performance grow on while slightly. fine be X%

point, and expect second hold normalization the see positioning with in solid credit At XXXX. second of side. favorable continue this feel our today. customers continue the momentum consumer the solid We We currently trends we half key the given loss rates commercial to half only to on our should in into gradual metrics both of well up

rises. We to will benefit continue rate from

remain the resilient, ROTCE The benefit and XX% program. and fees if it potential operating from the much will recession, positive with a is and slower beyond At as to there point, assumption see the this Our for believe we and base QX about we a leverage be XXXX market TOP X target on We concerned and growth XXXX of credit possibility the in should for we higher shallow rising recession costs. economic short-lived. QX and should expenses in XX% seems synergies range. our our moving acquisition project

being moved several sale, are on for to and our position. balance originations, held to from investors new we've loan sheet selective portfolios We highly largely optimize

good relative be believe credit performance We a It's Citizens. should downturn our on a basis, exciting time continue come. an will to for

managing are flight well. have promising in initiatives We many that we

growth. financials our a where cover John it more and gives prove feel me opportunity the prudent, mettle The we where up us great to let current can With the right that, our turn sustainable are to have environment strengths challenge. a to in We to certainly leverage John? areas focusing over detail. We and to on deliver we win.

Thanks, Bruce. Good morning, everyone.

and reported We EPS $XXX net and of First, referencing million I'll underlying start for quarter, our with of the $X.XX. income slides five. headlines four

ROTCE Our quarter XX.X%. the up was and loans XX% and improvement income including point a driven interest up by transactions. quarter for were of in the underlying was quarter. HSBC linked XX% Net ISBC margin loan growth, strong XX-basis Period-end impact linked the

linked diversity in and X% quarter by commercial. HSBC X%. were or our linked quarter, added resiliency loans Underlying of and were are acquisition growth fees HSBC Average growth impacts, up by excluding up ISBC fee the strong a of ISCC led the excluding acquisitions, with loans transactions, X% loans up Excluding and X% loan X% commercial the was X% reflecting XX% growth businesses. average

Overall, ISBC Our up HSBC Wealth business transactions. quarter, leverage Card. We positive slightly that down client delivered market were had and the hedging we delivered which fees results and and ISBC and record XX.X% another transactions. were excluding bit, exceptional capital fees quarter the quarter, linked disciplined operating X% X.X%, excluding were Mortgage and HSBC and we in linked underlying continued volatility. of given on market remain up was a expenses

the ISBC million, Our provision reflects expense provision the credit performance double for underlying The retail underlying the million We quarter and efficiency of ratio underlying recorded of portfolios. improved excludes transaction. for XX%. the for continued credit excluding to $XX across losses, which $XXX provision tied to count ISBC credit an commercial strong CECL

quarter. from ratio first the X.XX% at ACL the X.XX% stands at of Our end down

AOCI. Our down and that quarter, linked of tangible impact book by impact on primarily valuations securities X% was share rates the value driven per hedge rising

with the common have summary the well purchase We our a Slide On the second position X% a XX by quarter. ISBC at share. continue provides contributions our increased impacts dividend have provided for strong the X, we to capital X.X%, to and HSBC we $X.XX to and a CETX the have the very Also, quarter with results transaction. Slide ISBC as in associated notable appendix of items accounting as

rates. X.XX%, net X, of in the second Slide interest left-hand was rates HSBC the you XX%, bottom adding reduced are of asset On takeaways margin ISBC the X assets, Next, and and higher funding of walk There of and income up reflecting securities and the our higher points, impact and some a ISBC the securities the the ISBC on basis up point costs slide yields an XX% interest-earning the quarter transactions, reflecting from net interest point up is in improved linked results. The the for margin transactions. given repositioning see reinvestment their benefit yields benefit basis growth interest-bearing including given portfolio XX are sheet points. outpacing X costs. can basis net side points XX interest Earning well-controlled largely margin balance strongly of as XX sensitivity benefit deposit our only I'll deposit provide basis basis of loans. rates, the XX up related which quarter, With asset with shows which points, costs, the our the is asset to increase rising NIM HSBC basis key

Moving to Slide X.

recent continue plays market we rates the to rising Fed's from rate end and rate are XXX the curve for to points Fed to the in as the we confident funds range, expectation the Given will year that forward the meaningful out. basis XXX realize current benefits hikes

either second XXXX will the has half of of compound or first asset changes sensitivity forward on of down continue further and those sensitivity top the we've estimate in side to benefits the of into up uncertain, the accumulate rate Our NII NII provided of a rates, in cycle is the left this in Since the this half XXXX. to driven in significant path year, an and XX from improvement June page, our curve.

second down protect for the stabilize incorporation overall from at hedging taken of first Our downside asset X.X% and NII as profile at quarter. risks. is This quarter, as about reflecting X% stands the margin and interest actions end to ISBC's rate of against base sensitivity well liability-sensitive the the the

Our million curve improved sheet to instantaneous a in to also sensitivity. reduction as Essentially, forward in quarter a in with million outlook balance the as that the basis rate balance they our is between well as contributed the costs funding liquidity worth significant as and overall XX including our deposit $XX parts change asset the cycle point began about $XX NII changes a capabilities. and and been, short deposit improved, curve. the mix improvements to We ever low greatly with profile, have profile the long strong of

will base to our continue and durable capabilities We attract to deposit optimize to in customer our invest deposits.

we cumulative beta forward beta of So curve XXX sequential Fed for our performing how of This through XX%. a this far funds quarter the franchise end cycle quite for out if rate the puts points cumulative cycle, the XXXX, expected. are quarter, about of with the pleased was as our a since X%. is second beta us a track this On with increasing deposit plays fourth basis on basis XX% with

revenue. X. results, a were market impacting modestly underwriting solid but advisory We demonstrating syndication despite Moving diversity strength picking and delivered on the posted continued lower to the Capital our bit, and saw businesses. M&A equity results by bond of markets. more fee volatility loan solid Markets We equity fees Slide up and than these offset

and primarily is continue hedging by the business, our in up the if of half second markets again as we the the in FX more once strength the manage could down, during performance regarding currency help We and markets driven the to certainty pipelines quarter. nicely $X million their good of economy. delivered there capital exposures a quarter, strengthened dollar client in see settle fees clients year We path as linked record rebound our

very modestly Production fees amortization with origination interest resulted servicing down under modestly continues rates and rates mortgage and given as were quarter Mortgage performed slower competition seasonal income from to improved given first the of also pressure quarter. margins. industry levels volumes Strong commodities higher the impacts. up were lower Our fees in pressure rising MSR. well, record rate but businesses linked in remained

fees annuity customer seasonally Card which signs delivered year. linked rising market wealth record there transaction well expenses industry higher flows interest is up products. X% controlled, capacity, head clear linked were On excluding However, beginning and the supported that a volumes. rates the of half given to should fees, HSBC into reduce nine, margins benefit as also ISBC. as second up quarter, We were slide we X% record into quarter the are

track beginning on by on were run to pretax XX of at quarter, Our progress, end to Period of up which end continuing benefits primarily good deliver quarter. TOP make the X driven transaction, the program the rate XX% of million year. impact closed of $XXX linked the by the efficiency slide the is loans ISBC

the commercial X% to points led continued utilization with consumer across In seen pandemic. in X%, since by early as of C&I to the selective a every C&I by were strong in see loans banking optimize we basis, growth growth emphasize with up this driven the Average again growth increase quarterly the XX% and led to the Excluding or continue lending. with as Retail Line relationships growth primarily returns. transactions, loan corporate up utilization strength risk-adjusted banking in largest spot up ISBC more was HSBC in X% rebound we X% loan we HSBC impact on quarter basis impact the strong transactions an about in XXX ISBC X% commercial excluding region. X% to linked with loans have of increase and corporate originations continue of were commercial, in retail. to be XX% by and quarter, we

we ISBC to the use capital being York of quarter to will $XX.X non-strategic markets. held Comparing input financing get linked to are loan and we quarter pro the for were volatile XX% inventories the enable more bankers bond XX, their relationship our sale. some up added commercial are at period-end classified billion, looking to $X.X build from This alternative deposits up Our ahead with our which are loans to continuing also end. of identified and issues the and of These rising were focus as supply Metro. relationship lines bank for rata On an clients prices in transaction. certain in billion acquisition, chain totaling portfolio on ISBC process to business deposits as sale marketed as free New desirable we slide

slightly, Excluding runoff while down ISBC surge reflecting slightly, commercial a in deposits. deposits decline seasonal and up were were deposits HSBC, average on period-end

linked but excellent this retail the portfolios. saw six were again quarter. commercial and standalone Other percentage drivers ISBC, after are slide points, results this walk points commercial across XX, stable to quarter, to loans six On basis and metrics loans on Slide on XX. C&I, equity. allowance excellent points as a the at the quarter loans Moving basis XX look of home fell basis. retail to Net basis commercial real XX quarter. down driven residential and charge-offs We points total by of incorporating in Non-performing estate, improvements continued credit basis I'll linked portfolios across the down the and a of portfolio through criticized credit

see commercial credit to across of reserve retail loan the growth as performance commercial portfolios. continue excellent well account strong into We added quarter addition take this ISBC. the to We and the to as

given While we more signs in aren't of expectation this the to takes rate point, Fed's challenging seeing stress our actions inflation. the early into any the macroeconomic portfolio allowance of outlook, at a combat account

lower which portfolios. first with a decline requirements retail overall legacy ratio of portfolio modest Our coverage reserve quarter, the the CRE includes the of portfolio, a our from and is multi-family addition our the sizable reflecting performance which component strong was than X.XX%, ISBC's

when at context, If to our be you applied current coverage level was would day our X.XX%. approach. coverage current put adopted ratio forma beginning portfolio ISBC than estimate coverage our our lower we incorporating ratio in ratio CECL if our the one we To recall, the XXXX, CECL mix, today X.XX% slightly pro of we

coverage the the XXX% we've years from strengthened overall in over our portfolio the We and few quarter. of feel to past loan first positioning the of up the XXX%, non-accrual good credit about made Importantly, risk. our loans improvements

sheet We excellent Moving maintained to Slide XX. balance strength.

ratio Our X.X%. at remained CETX strong

we common announced Board DFAST to increase the share last to in share. Fed's a today, billion. dividend release $X.XX increased results X% $X the And Following common month, of an authorization repurchase stress our our our

make capital On gears Slide can across expect serve of disciplined Shifting some other key deploying extremely not doing better against our a made work. you'll for priorities to us how bank are a to to we examples XX, fundamental work and have and Our the changed, great you remain see in company. and strategic the bit. progress Citizens place initiatives we the manage we the customers

you new of April, of systems acquisition. mortgages teams ISBC our We more colleagues work second we on day very quarter, systems. closed the have proud onboarded to done of we began and on focused than am related As know, in HR the through a on the acquisition the integration. X,XXX successful beginning are at we one, our and the I originating our

finish conversions of on are the remainder have quarter of year, in of the we first the planned We XXXX. a over number and track to

a integration appendix line included the XX. time high-level on Slide have We in

expense efforts, The highlights Importantly, released are our targets that to which including XXXX. to greenhouse be you initiatives. million highlights report ISBC's of achieve corporate come we reduce sustainability significant estimated ISBC of are the milestones ESG of XXXX integration in XX% number synergies the on emissions. XXXX, deal towards our target related now year-end to achieved recently incurred to annual below We total report, a base. XXXX announced. by $XXX about our responsibility of which level XX% costs Also, gas to through will progress in run represents be expected fifth rate of on our progress by approximately net end expense The

we the few Chinatown are York. communities we serve, the slide We describe Partnership first in the we've strategy most to also Carbon Queens, will more we'll Financials, efforts report, a commitment and our in finance for that with TCFD partnerships in and emissions. accelerate describes detail. of the examples are Later The Accounting measure which recent announced our community recently and here New our our also which Boston will engaged this on disclose to release climate report climate year, and some there joined with

the the Innovation our a in Naples. recently by our Florida point-of-sale think Wealth we Banking with in excited On are with awarded Best the We version latest Tech And of was about side, offering of Access, we app very will our proud be that Center released continuing Awards. mobile our consumer opening Citizens expansion very are we Citizens customers. which popular Pay

Lastly, rankings. channel customer in eight our driving the ATM as Power our moved relentless places up results on focus J.D. service,

ranking the in top league model as record delivering our market to On the book well and revenue with in runner. continue sponsor The perform our business. client FX is business a consistently commercial XX we tables, diversification hedging in the in side, middle results

Capital closed quarter, in software and services next-generation this and IT sectors. DH We our the also the capabilities infrastructure, acquisition strengthening Internet communications

are transactions service On the metrics. the of we XX% are XX%, virtual are and digital Mobile success seeing Digital up uptake right side chat great of page, automated and included over client we've sessions. Zelle active with some deposits the through customer users over year-over-year. up

with digital this a approach how excited We into experience engagement increasing satisfaction. translating customers our is better are first very and how higher and all our is with

to Since second quarter, beginning XX. our the for outlook I'll we of quarter outlook quarter. closed our Slide third Moving acquisitions. includes walk third the the all at the ISBC through recent

NII to expect higher growth. solid and We to driven loan benefit by X%, be up rates X.X% of the

very are be further in-line of balancing education we'll optimizing if will and grow upside but and auto home In expected and returns Pay expense commercial, education uncertainty. seeking refi, in exists, up expect deployment. see reduce school mortgage, growth is These current in approximately capital be focused Noninterest In markets We while increases in Card. we expected originations and stable given X%. utilization, we consumer, capital stabilize. to on Citizens macro broadly though to to be are to mindful equity,

to are basis continue third be quarter target to positive ROTCE XX operating strong of to expect medium range the approximately our in XX%. charge-offs XX% expected points. sequential and We above leverage Net

with at revenue standpoint, should growth quarter, rate in sub-XX%. expect This come in-line fourth XX% We results, given efficiency X.XX%. ratio fourth full to approximately key April of mortgage. basis we revenue respect which year guidance ratio by will we reaching to year in our land range. our operating a of leverage our XXX a From well a result the seeing points the controlled, be will in CETX With NII higher driven guidance. XX%. to be midpoint our interest quarter around expect are to X.XX% lower rates PPNR largely and loan bit and tax net approximately full And least will capital XX% our at by be and markets of Expenses lower in higher within range offset operating at margin,

to favorable sum We also ratio XX. we optimistic on was To quarter given come the in for trends. lower and XXXX continued very up are Slide we net This April, of charge-off guided expect the than rest outlook and beyond. in about a the solid

We well start in strong our positioned interest two fee for markets our running markets results particular net of the in close strength are income growth. and the expect acquisitions off to rate we our diversity and commercial of business benefits York driving and there, environment loan when and from given significant New our a pipelines. with strong in is stabilize is The capital solid and business, higher

to and it hand With focus our delivers priorities against that, strategic a executing over I'll bank on stakeholders. We back building our top-performing will that all for Bruce. continue to

Okay. up Thank you, it Q&A. John. let's open Operator, for

Van you, Saun. Thank Mr.

line Q&A [Operator Evercore. ready We Pancari the with question Instructions] come from the Your please. portion first ahead call. are of Go for will now the John of

Good morning.

there. Hi,

Good morning.

what actually what could consumer of the lending. more it that's or selective the for front, maybe selective, making a give Thanks. you just And consumer loan growth portfolios? in of Just areas you're that I terms color you it's in become indicated more you selective, mean I there Can broader being seeing backdrop? are you in more credit areas you're what that some question. guess the on becoming also is select know

and in But at the to start, current sure faster I'll ideal me environment. John, then and to then in. grow pace have might be a we I'm let maybe Brendan Well, than in continue potential to I chime think go to want Yeah. consumer would the

a a commercial we're to seeing we're through investors' rate plan think capital of I sheet, growth up. allocation going uses now strain on the that and best environment focusing this we're side is just transitioning utilization and line So as on the and sure picking we're environment balance growth And not in highest deposit of out the seeing right in game point. higher on this of the putting light there making lot the at

consumer We're where really things Citizens cost are areas in-school growth the be when So a like past on more to to return clearly, a of think on auto also HELOC, returns Those student are originations and look stable of mortgages opportunities Pay. deliver basically grow years. we a we put path start areas the we've where auto. have world, reduce the over into in better couple and to going mortgage like return we that and would seen It's lot in costs. and then card capital our

capital we'll see overall, take some to think some and we're really here focused but I growth, some and minuses be net pluses allocation. So still going on modest

that, So do you Brendan, with want to to that? add

early guess pivot strategically, is We're IPO, stages the the I I'd everything add our natural our Yeah. think is for a most at accretive of this of just point was the part. journey I what strategy. for

we've if so is our And sure. scaled our journey, diversified not lending I'd this believe of franchises allocation the phase pivots. we say, our consumer news. And brand-new and king, enter is also business. one run strategic we making some next most and amongst for have peer this well And necessarily capital set I up really of we're

an we of And a market on start recall, COVID, and we vintages as some COVID, you disruption. example, returns If put reduce through to signaling going for to started and great to already levels into get to tier auto, concentration. had prior path back found were we

now sort of mortgage a return been focused. growth point returning down of and our sort model to -- we've some then relationship in So, time. for path on and quite to naturally mortgage, state, up is And to less original lower business through our we're sheet of the balance the on steady outgrowing Bruce's auto glide given auto, diversity us the benefit that of of business flex allowed COVID the Citizens

where faster at would to And no of that just nature of rate so we're duration interest on long like rates than the given bank, now that a the and grow right for we business.

sheet making really our sure we're duration customers is and key. so lending long And relationship for real for balance focused protecting

the COVID quality and coming US pointed poised origination. prime The of Bruce that for good in in then XXX as wear product, gets, over Citizens that as allowed product. leverage a little year for partnerships we're fintech and originator HELOC six served the well to is we've it bank, us Credit in-school And as bit is curtailing a is to that. effects back the super extremely but other on being FICO, we're the operating invest years some had medium-term us place much as LTVs more student we're our focused in is have pointed, bit growth one relationship very one, capital HELOC and our do we're number that believe Bruce allocation on a about enrollment our aspirations strong as of excited, where and king. back couple we places off student the we Pay, franchise. But out, the added being capitalize

mass, optimize decisions think making capital I can balance muscle well-positioned. So, just flex down some We We're taking not allocation up. the sheet. as we're we

we add Okay. think lot, anything to said a John, I

good. we're think I

that. then just credit All separately And right. Thank on again. for you

of the And begin Just that the could that How that. but is think does here? you do time? take you slowing hold, meaningfully level you your outlook economic outlook? you think build given fair that indicated if where a potentially also that degree this could reserve expect into economic XXXX, more to a your reserve what I year look do think into know to traject in do over do your you What about reserve does you of as had some consider rest you see

hand had and incorporated the out off have John. things it kick into day one those about would to quickly pointed Investors numbers. we we of the reserve one that been I'll we're But was where

we a X.XX. down have one. composition, day scenario and slowdown look Moody's But GDP at if you of that into incorporated scenario. X.XX the have higher some in And this So, we're at ratio. that It's shift does risk recession the from a about asset

absent say, outlook hang So, a for neighborhood I would while. a in this we probably around that could change meaningful

view. for the So, anyway, top of that be But John, detail, house please? would my more

this next Yes, mean right. think I sure. think relies into I predominantly recession, year. I mean base quarter a would on last scenario which really our into I sort that's mild of

that even over where a layered it. also of shift So, in of into severe recession. our more portfolio aspects certain last we years. we're I the portfolio has point, to We in And think built positive the are. extremely couple covering part the That's mix of been Bruce's

you the XXXX, to -- much when in quarter of our beginning from XXXX first forward fast profile the the is So, second mix of just here XXXX, of the quarter better.

macro And lucky to almost you year. into get range in have And the deterioration we're so back where fact we're indicated, priced as to can beginning the the you of this and a significant of that as the think in. sort in the without Bruce about we some uncertainty be end some scenarios negative

I And it think makes sense.

has with to trying about COVID. in and They're liquidity. maintain out just and the consumers really shape in and you good still back their models of step pretty inflation contending chain and have refashioned Companies a think If lot their shape, coming of all margins. business supply good

a jump-off charge-off up So, go bank historically, you if a you have through much. don't shallow all rates that good point, go recession,

for in a off outlook to to come I us you'd change So think meaningful view. have see that

Thanks, it. John. All right. Thanks, Got Bruce.

question please. next from Siefers Sandler. Piper will Go ahead with Your come Scott

just additional see cost play how pressures thoughts question. Thank the Good out. morning you on Maybe taking you deposit guys. for some

pretty where we deposit cost the through and expectation. was cycle I to out think Slide XX% XX% year-end. we flesh X, raising full dynamics you how sense the can can then through do specifically beta Fed glad year, see sort a to once get look the your of you pressures from you you good get to on reiterate by the trajecting of you stops the XX% year that thinking see see the But the if maybe And remainder the rates? as

mean, I the articulated mean, describe I'll cumulative than we Yes, better expected. quarter, our think that. the I we beta take through best X% I that. way to second that

starting good So we're this about we're rate off feeling cycle. where

a range indicates of betas outlook Our year, mid-XXs. the around quarters deposit to the implies XX% into sequential which beta the by XX% being the end getting second the half in in

how would out. So that math that's play

that how as that throughout the behaved of of deposits and but expect year. continue are expected, well on that's we deposit would well commercial retail predominantly betas, trajectory the business, performing consumer The side that incredibly drivers the So of in to are of and terms and the work. rest

on of have the to Deposit XX% and will been into bit year all of room XXXX, our continue you into for through a end Citizens XX% balance Access. outlook betas approximate the difference we the to tend the they XX when end XX cycle. the by the rise the between sheet whole little and And easing Fed We as Fed the approximate the assuming easing. to So stops, the has that of the and that's get incorporated of the for that for quarter, And continue thereafter, last cycle to we're doesn't we were the the right? the rise to over about. Fed cycle, XX that had start talking next XX% immediately

interest the you some the rise, of end the betas. often tightening that's continues when really all drive as equation. should then would lag add tightening deposit tailwind effect what continue And in from fixed to even continue lending which steam our, of they that of betas net would quarter at sort and margin betas of will would to that fact term I in another Fed 'XX clipped hasten deposits. side two see Fed loan of the the stops and for after rising, loan and so there's typically see this continues the would Fed get Fed to the stands would But or rise it are basically after and particular, beta to loan costs beta if that But the cycle to the And given off cycle, say, hike. throughout rise loan exceed continue into the to the that really Fed is rising we stops to that that gain side you you the even Fed rise last the deposit

lines color. of, Okay. rate I Perfect. great more all-encompassing guess And of sensitivity. sort those along That's

you're I there. in ISBC less little now asset sensitive So, guess a with

kind hedging. now? think from steady or of is say you rate where sort your of, changes with moving How couple this a I of for would the here state we're a at good sensitivity parts overall

Yes.

also, Let NII. me participate, like has back Scott, jump keep give in. level NIM think Fed we It's sufficient and level this asset Bruce, expected. But it of this sensitivity still to John. and do, that we've what is spot where to I'll tried beyond sweet to if find But we to going of have the what's I

amount a And that in fact, so, if in down, a NII of fair a in recession offing period rates time. turned for then the locked is we've and of good

and we right try away continue where that to So we take John? participate to upside get just to in trying it allow where over the balance to the land downside ourselves is, the quarter.

management that assets from actions without the base the But – big really point percentage guess our your unfolds just in the the how that. Yes, on you reduces be the NII the think that A just alone, that source decline that, bigger I was pulling agree of management's the just about primarily – actions. was to – have calculated. base decline so and ISBC, as a from quarter in you is here. balance sheet with I And

you if rise take -- management's actions So, to don't our to looking tend forward, again. you actually, if asset begin sensitivity away would

a lending the lending. mentioned floating fact which consumer commercial product. is lending, rotation consumer is consumer big driver, of a a the HELOC lot the rate into And As earlier, out that within even of

June are in will is management's to to are little that scenario. us really that's so, was end under rates land we as get feels – absent the really like quarters, would as inflation, remains of year, of still that actions, get sheet of and wanting a if things. the right? high, coming you in -- the all stubbornly take us that reestablishing going to where peak end see towards lock the inflation you year, about tell If the it the balance tell bit the it sheet more. And asset we we unfolds tale You balance things as sensitivity If where the

asset plays out. on naturally see But is some sensitivity. So, how lift we'll upward just balance underpinning the it sheet

guys right. All Perfect. thank John, Kristin, you very much.

Sure.

ahead. Winter Your with Securities. will Wedbush next come from Go question Peter

wanted thinking talk to Good you're the growth just you of deposit Scott's I in on deposits. can just about up this follow second quarter? how regarding question morning. But half about second the versus year the

Yes.

there. It's surge the a XQ tends off. is off that the there deposit fact -- is, frankly, the the which year. a the right? one was was business commercial, commercial of driver flows, now two run down by One of points during smaller some level being and a has June. that most And -- relatively that a think the of have been And in natural been as running the to that's I got big driver end lower our seasonality of drivers to also you've driver there's

uplift broad well. as at execute tends So, the half deposits also about driving the standpoint from business drag deliver consumer surge years in through the the commercial made the over and against of to from seasonality year, and runoff. driving when commercial think rest the and to a continuing the they'll investments in the you But of second uplift natural be we've the side lower natural frankly, all multiple

second So that's how playing half see out. the we

And how in...? much is

that to clear. just Yeah, make

be well. to And as by to expect So would in the net also would be think the would be growth, that -- led half. some see consumer resume we'd growth but I expecting commercial growth second

of the color you're be type versus be just more in But could third led just you I'm some going third growth utilization gave quarter line moving if on wondering specific commercial. And a by parts consumer you rates to commercial on in the and expecting on little maybe loans bit the on the quarter?

we Yeah. -- But of on the had the helpful here, on mean average we growth. Well, talking jump the about in the I in the quarter, we house, -- growth. had X% off second think side had commercial I just maybe quarter, X% because the second basis, a spot

commercial So quarter. implies that what second the that be in you're can driver to is that you a likely big see see

see. So you're -- you

In the third quarter.

I'm in quarter. the third Yeah. sorry,

being a into driver commercial quarter. big the see you third yeah, Sorry,

consumer and to think see and student other I card see to a home takes drive see the of categories a things maybe where and in you of it equity bit and driving by little mortgage that puts like little in you're some we going auto bit. offset being

I growth. and So but would utilization Utilization XX-XX to continues articulate that's commercial about it's how other increase, been it.

utilization similar will as of driving and into the in half And say But color be a percentage saw the you that the driven growth utilization. XQ. by other half about again, suspect XQ so of XQ I amount outside it primarily well, loans, from that, that maybe coming of loan commercial I'd

commercial, I of on to Don companies markets could the when able is and And water. kind new still financing, access at ask about the pretty right one are that you public comment this thing maybe in now, how to are look

So you've opportunities well. more for as of market seen kind the institutional

second look So market into the the I out is uptick, has to bank syndicated likely an we half. which seen think as continue lending

to want maybe on some So you give that. Don, color

Yeah.

and XXX And points got Markets just the utilization C&I said, another in to put the the up by third I basis on think John across Global that's books what a point quarter. books right. we've about

access transitory a as is to of maybe we're some balance want non-bank point, in balance starting coming the sheets instead companies trend billion the us And some also the of to really that Bruce's more buyouts sheets refinance bond and because of to so in some we're bank couple onto for the transactions for market the financing the of gives a dollars outstandings. acceleration So coming see potential bank seeing more lenders. much to on opposed M&A attractive. market might bank To that

some mix lot it's not some mix to for to what go what other three to of beginning going because what things are Brendan doing that materialize. be, all of but and just other exact change So there's slow to said, the We're of down we've now that. portfolios years will books. And on to or down I know the two take what's don't similar things, going a the been up

being we're very little selective more So, bit both go also of terms the deeper like, the case credit we deploying, but get a in capital into risk careful of a and little slide. returns in of just

the So, protective just we're of risk also. front being

Yes. the a And second out to other out bit little maybe to broaden thing, it half. is one close there to just

of I a think there's parts we lot mentioned here. fact, -- moving in

range had a fall and year are these basically range clear guide. for XX% of parts that the growth and lot we And out to so XX% there's XQ, it in it with we moving to of make loan really in growth shakes XX% we tried And but helpful. to a April of it guide between going that going all the -- how our increase into associated that's deliver XXXX. XX% there, would to our loan as XQ indicated expecting we're And on last to where hopefully,

all for color. it. Thanks Got the

Cassidy will with Go RBC. ahead. question from next be Your Gerard

good morning John. Good morning Bruce,

morning. Good

Gerard. Hey

Can that healthy, strong How next as forward? Bruce, good go possibly a you you a tightening, little identified year, cautious claim credit job loans, guys kind quantitative you month, like most student of share thinking so home the we quantitative $XX at unemployment more more is guys equity, this But are what thinking up rates this can they not from possibly that and guys or guys are all understandable. a tightening from we as could institutional that credit, about and inexperience. billion have really will part what pursues stuff, are of which you've a with into happen of traditional disruption areas of I that traditional of completely much year, understand is going separate done about being you consumer the outlook at but us which kind lending, Fed have on they looking the the us the kind going if think you the that. end the market but new

from the took relationships seen in lot have a banks it to view bit a when the customers space, is to did tightening Well, it, amount on be biggest can deliver took commercial and both maybe and but end we think custody going establish on to whole waters were liquidity of for we extent up, we side we're we think on and haven't we interesting because the quantitative banks working opportunities watch. of a some of capture I was And lot and space, I additional lot had it. the side. super-regional probably sub-optimized it, playbook I mean where the uncharted the a where of on the if now planning that the back lot of consumer our think we I deposit about that that to the benefit our step better on a easing just

and tightening liquidity you still have terms optimized and grab the initiatives try and to of deposits my bank a fully view, in not impact see probably to think we I think would, number base, our banks a be most like go that. folks ended the up, per we're of we're which where in custody bigger the So, us, it process, banks. share to I gain In the relationship market continue where the the going

the in type good. impact. the the think you that you've syndicated don't quite Very could the it about but have can going doing market, been successfully side? some take about past. it's in out of to of of also know the how Obviously, of guys QT Do you I loan some think think business liquidity terms from that you it And maybe

loan not I'm will -- think driver the huge volumes. be in that a necessarily I don't guess I Yes.

spirits the money the and think that people spurs work. wanting animal I growth put in to level of GDP and activity to

If, I bigger Don. Don, think thoughts? have driver. maybe But defer on over that's to that, you a any I'll

where they'll a about mega Yes, lower were, seem deals worried action I it And I'm too but -- much again, volumes struggling piece. the are think they -- syndication be the will and I'm not than is, loan bit. Gerard. be little not to the

environment execution transactional on and through have we we're, about challenge think the the the marketplace. So larger biggest transaction is then clearing if you

you'll think we're in. That's a the there. business I little not dearth really a so And see bit of

of interest maturity the the And action in low of high-yield ladder relatively securities over affect is bonds I'm seller the of a out. the the environment market the things because a took other about couple the years it then as price So will business. one years push -- think a think on I light think versus in particularly is that of next And you don't corporate couple what's rate is couple for bonds looking and of goes at the and buyer. is advantage thing our that last Fed I refinance for maturities everybody the those

to time that some for the So adjust to we market to I have we're think trend see. QT public going particularly market to adjust in the

And as good. Very then follow-up a question.

for what the when of You types for guys course. the think, is sale. criticized basis And down, But loans any criticized went it the put held us of holding $X.X Investors for criticized of Are your loans. also investors a loans from loans aside good, you of $X.X description a that standalone billion, sale? included stable you were billion give of Can they I of kind investors which on indicated loans? you in

content, did loss half a that you've is Yes. go are some not respect good and very outcome. The underlying state you There of of approach manage it. an criticized equipment think coming how non-pass that -- to importantly, a which that that just chartered But a stuff with there some driver got to of and migrating OCC-managed criticized ISBC assets that approach. was kind -- stable out we of the portfolio. from are about biggest mechanism book, of lot that's the into is non-accruals And an finance with to book more being of our fundamentals

there, the over. profile pound, are needs And was on quite ISBC that content ACL an low. side perspective given lost came that lower the from of So pound an ACL but actually things, per impact the in basis, that

we're So that. feeling pretty about good

Great. Thank you. Thank fellas. you

Sure.

ahead. Go will from question next Your Najarian UBS. Erika come with

Hi. Good morning.

I'm how bank expecting given last step of detail the Just underneath if since you're talk have interest back, you NII more it about done exclusive terms we in changed great a us cycle. has that strategically, job just outlook, wondering giving could what taking a guys much the

interest cycle, Access. aggressive in you you last Citizens be front? be room are Citizens rate more the now, would maybe through in putting So And some in your side of wondering, to offers about Citizens lower after the is you to portfolio on from of to the I'm sheet that How investors acquired terms aggressive there rates go-forward how advantage about allow side slightly Access took composition the And on of forth especially going on great competing as investors the balance rate deposit-gathering the this should strategy? think rate? think in investors, Bruce, you deposit

Yes.

base, then the we've and But both to baton reformulating maybe really feel pass in start, we deposit made the the say, commercial. consumer me and good Brendan Let just progress here John. in I'd in about I'll and

of in much we like relationship a of lead more kind rate with having got orientation kind So, consumer orientation thrift we and inherited taking not that when that here.

terms the of And and size per noninterest-bearing the of growth, so, household see the of you can deposits household just the affluent results going growth, that the stickiness up. the in

So, all those think they trends are continue. terrific and I

deposit strategy the of cornerstone a that's going So forward.

outsized Citizens those. for giving to I we Access I and relative going really after compete mix. lane pretty narrow don't have deposits up in overall kind ourselves to think interest-sensitive swim been ever setting the that, of a and become go that's astute to think

play of some we the we will we need, when the capabilities out. out of we so, other wallet base services but again, I years have operating get Ultimately, didn't then seen over to weren't certainly we've good those customer in and get the services full bank seeking them And as accounts that few with aggressive and customer national it's can as have of of can lot base. been rate, the to want where They the And commercial, bring we've we relationships built try as if sensitive like in, it's national escrow deposits weren't on a to it, we we the there. we a of think rate those incremental range the things maybe think built full be it different little last to then its segments -- get I and some need we competitive. serves with purpose. weren't now growth deposits, and

kind And growing can get of and going deposit continue a strong. And the which while we of maintaining upper would the the flexibility terms than lot we'd think whole growth mid to to find so, can give it to like speed amount our LDR kind growth faster forward peers, in be reasonably an I of hopefully, of us that of loan in XXs.

consumer So that's thought a around on the something little could maybe add side. of you bit house But the top process Brendan, that.

We're I I'd the mean, model, had up materially storm was higher Yes. it higher betas. the more balances. business We than us consumer loans promotional had a of for a last perfect thrift-oriented, Bruce rates bit peers. growing pointed for say was cycle as on for out, side, faster

built we – fund was less healthy did loan capabilities hadn't to base of had bit the up out our peers. And we we bank. fully the a So, little – then all with that growth a in on than

So, long-term our value engagement of to I increased portfolio That's as health consumer look the on customers us deposits all based has dynamics, that’s and and bring and just that's those underpinning at now, to with allowed to low-cost primacy that I elastic stare quarter-over-quarter, down. at materially the continues of creation, improve deposits remixed quarter-over-quarter. right

like in something $XX Citizens the deposits, billion in aside putting mid-single promotionally billion Access. in $XX cycle, core priced up the bank, elastic had last to we that's So now digits

-- improvement is segment better rate cycle performance. for That's low XX% beta believe a the have mixed the XXs. mid-XXs into on So to of a consumer We still percentages portfolio will the from cycle betas. to cost rate net in big XX% buffer the

The and capabilities. we've built is lot of things we've done tools a other

is We've not capabilities analytic now sophisticated different very that's better targeting. highly bank. We've good something composition Access in Citizens with So at. we're it. But dramatically a the product built core built

really we than point with we do starting to need we We beta beginning much make and it in mute but go in inside Citizens green the which we raise are relationships in form. the consumer growth. would precision can very can to Citizens core think did So get we contain a Last where Access. in and see is impact will the the shoots allow bank, past, more deposits Access, deposit to us I of deeper targeted some

but that's mechanism raising this contained on So deposit just the to both going And betas cost. side. it's also not benefit

started and some us loan national tests to mortgage results customers that's And for quite drive the to it more we going make raising those much side. side, expense Citizens been deposit student drive deposits so on rates, doing positive have to Early and just as not national we're Access across our our customers. the to affordable beta raise

health were a the bank years improvements dramatically lot in of different a right position seven five, the So suggest the franchise. of is consumer now than we would I ago. in

Brendan. want you to answer, do add Don, Great anything?

have Brendan, to and and subpar. deposit and mean similar here say years when we started group fundamentally our our journey I I'd liquidity payments subscale seven Yeah, not did ago business we basically was a

suite business, which good -- a in analytics a operating with to just deposits completely as begun you that sales core is our we've to it. the getting different we're mention product some develop capabilities, and said, bringing the So payment not Bruce, the our And lift is just place. our on in

relationship it's pull a much the stronger client base. So with

As deposits. to the client opportunity in more grows, there's bring base

terms the feel in confident at of franchise So we moment. the very deposit

Yeah.

quarter, this playbook given well. that question, through on rate point we're but process. as a team et think cetera. your rate et not to and here, that's embark migration But otherwise that which closed that You're whole this platform, base that begun good rising well placed we're just We getting I have And deposit investors, lagged on be where cetera, other Erika, cycle our lagging we've to of run been that getting history, already might and to we'll particularly say our the upon obviously. I'd

And making necessary. the investments so we're

benefits we're optimistic was begin we'll to coming out part of of your some question. which So that, also that see

so Thank much. Great. you

go ahead. to with next Jefferies. We'll Go Ken Usdin

guys. Good thanks Hey, morning.

or of you things. guidance, you Is a on the that I we're the quarter refer check can zone the still it plus if this different Just back a for output think full that When with mix? about minus reiterate $X.X April couple the talking year. as billion-ish I year to was

the think guide. that -- what I is implied I PPNR Well, we're reiterating by that mean,

and -- credit better well about that, coming well-disciplined and with and the we I And puts and and offsets so yeah, see a and controlled and little well. I takes than expected you and very talked -- think as -- some that mean, expenses on fees on positive we looking and in seeing doing NII better

Okay.

full timing Second question, can in you you is John, $XXX on million the the us, magnitude original of give the saves and expected? expected rating Any of quarter? update ISBC run and cost

and the best you'll of of to see Yes, run next the then XX% the coming million I'd say $XXX think a year. that year, about of the full of the amount rate by is way about $XXX million in end that

Okay.

captured? So, would you know of what quarter do fully you expect that to be kind

first getting driver -- is closedown Well, of mean, big in haven't next the quarter. it the the it. to I we year talked

done half, that all part of by of the will of trickling there in XXXX. in most some be be will the by mid-year substantially So, it there'll middle be second will that getting but -- and benefits

last borrowed previously had at short-term and it. accounting. in was wondering rid that through had Got funds quick in And There I'm those ones talked about one. FHLBs and merger increase an were just you the you ISBC getting of

Thanks. taken seeing it? wondering, from we are the of over on the your just this adds there chunk have from and extra come are I'm -- because top that out, get just or is ISBC adds Kind talk did buckets, what's adds that came So, just FHLBs to short-term or relative funding might through now of and borrowed those two could the mix? you ISBC what if of new funds

And $X We ISBC. flows our growth billion about growth end Yes. the of terms then the of the balance in drove carryover had sheet rest changes the loan of from and securities rest quarter. a the on of in

have borrowings that we that sale. the Yes. And off, from from FHLB placed on the investors some timing, for I we that's Ken, of cash say portfolios that in would and is that, roll of will some ultimately, coming

a So, down of kind FHLB, would this on that watermark expect we and that high equal is would things the bring all year-end. we by

Thank Okay, it. got you.

Go question Vivek ahead. next Your from JPMorgan. from Juneja come will

questions. you. couple A Thank of

the regarding guide well-controlled mentioned PPNR You expenses.

HSBC-ISBC. Your Unchanged? can XXXX, for expenses a little higher expenses year this Any mentioned you previously that? quarter, range more expecting? When you you gave full what last were including on color a give color on controlled you little for quarter, well -- where than Lower?

Yes.

seeing I think out positive coming expenses. we're benefits of some

less think when to so well-controlled, we possibly say optimism going I we some that, And greater have than be expected. no that's a little and we than

additional costs? Okay. end, you was quarter Even seeing high second some are the other though at

to compensation said given we up up expense guide If true. revenue-based came and That's they X%, higher the in X%. X% was

sure So, I'm end of the range. that's at high the where not

see Bruce, you looking at at Okay. I at Because XX% to came it reported in XX% on I'm XX%, just were reported. and

I look that's Yes. underlying integration at to really have because that mean you up. the ticked costs that

so. I really we them And would QX. X% to performance at that we did strong actually It's flat. maybe if you look our And called we then a into keep out, the virtually for we to whole year. So, good where we continue expect are, job think, roughly thought underlying,

fact, we be some just quarter. integration overall the It's costs on just the but expecting We're integration announced quarter, costs. We're opposite. more we into at… see cost, this costs higher this integration not did lower signaling And integration than that's pulling to in

QX. pull in a That just forward was the back

helpful. completely can numbers different That's That's give the question. delinquencies? XXXX, a quarter us you XX-day Early category meaning Okay. loan for to second delinquencies, XX by

the both have XX-day Overall, to at we looking the all very that portfolio XX reinflation even see of side, modestly the seeing being some signs consumer Actually, days. been level we're at, do flat we're in delinquencies way through no down. any in signals of

materially of need the a charge-offs and a to Obviously, up on whole that now year. We is in those charge-off, So believe go a with net segment it would to a expect and to watching you very much take we're stable the XXX-day end and move cycle either. been net to net high between very the get to lot the used very would heck consumer recoveries what and of portfolio, of see place have positive. resi very things car don't the charge-off like values line the but on

in in So too. XX in more fundamentals pre-COVID percentile. consumer pay remain in the was XX% message overall in the without tick and credit still than Consumers rates pay is in a the of customer signs liquidity remains just still any on strong XX%, full, have the before really side XXs and cards and COVID. low and great everything deposits are That up, shape segment the low

you'd that you deposits ticking see customers probably to to believe start down relevering. that. not to you'd We're burn up, first see delinquency start see seeing to So and start

unique little a peers mass we're even that affluent and base much same segment… customer from some the skews affluent. Now when bit our more But in

score Credit prime. and prime was super high

We're those segments signs subprime market commentary any of we're the portfolio have some any and lender, don't that see really signs of you in on of don't any across It super where in be in. see but credit. the to businesses, prime we early space, of stress we tends any credit

levering And retail by seeing up on not Okay. there consumers more? of put terms stretching point you even sale, in in any the you've partnerships of the are other

to No, fact, performing two month Citizens Stanley some is below is, Pay portfolio-by-portfolio. a card exceptionally portfolio. prime credit The and in multiples we shared John I to ago, well the credit and I would conference, direct Morgan our portfolio stress went or and you

And five, so super not even it's only is credit four, it times a better card but portfolio. prime, than performing six

very feel we about that… good So

a we And on that's box take because willing credit are terms we the… tight to what in of draw

not grow you that undisciplined we're to drive desire growth. in we're very our going Exactly. But going and we've to that credit we've to been -- be And to been where on credit, to business business. on start not ambitious disciplined -- on

any equally signs remains so portfolio to it's in Pay great stress and Citizens shape. willing I see credit because where in see on jeopardize don't Citizens we're been the we've not manifest discipline, And our to whatsoever growth of Pay, slower

Great. Thank you.

Sure.

Okay.

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

All Have in you. We and day. thanks great Thank for appreciate Well, today. again support. interest dialing everyone's right. a

your today. your gentlemen, for that conclude will conference Thank and you participation. call Ladies for

disconnect. You may now