Citizens Financial Group Inc (NYSE:CFG) Q3 2020 Earnings Conference Call - Final Transcript

Oct 16, 2020 • 09:00 am ET

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Citizens Financial Group Inc (NYSE:CFG) Q3 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning everyone, and welcome to the Citizens Financial Group Third Quarter 2020 Earnings Conference Call. My name is Greg, and I'll be your operator today. [Operator Instructions] Now, I will turn the call over to Kristin Silberberg, Executive Vice President, Investor Relations. Kristin, you may now begin.

Executive
Kristin Silberberg

Thank you, Greg. Good morning everyone, and thank you for joining us. First, this morning, our Chairman and CEO, Bruce Van Saun; and CFO, John Woods will provide an overview of third quarter results referencing our presentation, which you can find on our Investor Relations website. After the presentation, we'll be happy to take questions. Brendan Coughlin, Head of Consumer Banking; and Don McCree, Head of Commercial Banking are also here to provide additional color.

Our comments today will include forward-looking statements, which are subject to risks and uncertainties that may cause our results to differ materially from expectations. These are outlined for your review on Page 2 of the presentation. We also reference non-GAAP financial measures. So it's important to review our GAAP results on Page 3 of the presentation, and the reconciliation in the appendix.

With that, I will hand over to Bruce.

Executive
Bruce Van Saun

Thank you, Kristin. Good debut for you. Good to have you on the team.

Executive
Kristin Silberberg

Thank you.

Executive
Bruce Van Saun

Okay. Good morning everyone, and thanks for joining our call. We feel really positive about how Citizens continues to rise to the occasion and meet the unprecedented challenges of 2020. We're taking great care of customers, colleagues and communities, while posting strong results that demonstrate the diversification and resilience of our business model. We are delivering record levels of pre-provision profit, and we're managing risks in our balance sheet well in the near term, while also preserving and making the strategic investments to position us for growth and success in the long term.

Financial performance in Q3 featured record revenue, fee income and mortgage results. The low rate and flat yield curve environment puts pressure on NIM, but our well positioned mortgage business has performed exceptionally well, capturing the refi opportunity, gaining market share and providing a natural offset to low rates. We included a page on this business in our investor deck. In short, we believe the mortgage business has room to run given a positive market environment, plus our own strong positioning and capabilities. In addition to mortgage, we saw a solid quarter in capital markets revenue given strong advisory and underwriting performance and a nice rebound in wealth fees. Consumer fees also continue to move higher off of the COVID and related lockdown lows, which should continue as the economy further reopens and consumer behavior normalizes. These factors drove non-interest income growth of 11% sequential quarter and 33% year-on-year. Combined with a modest decline in NII and broadly stable expenses, we delivered underlying positive operating leverage of 2.6% sequential quarter and 9% year-on-year.

Our pre-provision net revenue grew by 22% year-on-year, and it's up 14% on a year-to-date basis. Now, this capital generation ranks near the top of peers