8-KRegulation FDExhibits & Filings

CITIZENS FINANCIAL GROUP INC/RI 8-K Report, Regulation FD Disclosure (Mar 28, 2019)

Filed March 28, 2019For Securities:CFGCFG-PHCFG-PECFG-PI

Summary

Citizens Financial Group, Inc. (CFG) announced changes to its quarterly financial reporting disclosures, effective for the first quarter of 2019. These changes primarily affect the presentation of net interest income, net interest margin (NIM), and noninterest expense, with the goal of simplification and alignment with peer practices. Importantly, the company states these adjustments will not impact reported net interest income, total noninterest expense, or net income. Investors should note the modification in how NIM is calculated, moving to a simpler methodology based on net interest income divided by average total interest-earning assets. Furthermore, CFG will now present net interest income and NIM on a fully taxable-equivalent (FTE) basis. Noninterest expense reporting will also be simplified by combining equipment expense and amortization of software into a single line item. To aid investors in understanding these changes, CFG has provided supplemental historical financial information for 2017 and 2018. This information, attached as Exhibit 99.1, allows for a comparison of previously reported figures with the new presentation methods. These disclosures are intended to enhance clarity and comparability for investors.

Key Highlights

  • 1Citizens Financial Group (CFG) is changing its financial reporting presentation for net interest income, net interest margin (NIM), and noninterest expense starting Q1 2019.
  • 2These presentation changes are intended for simplification and to align with general peer practices.
  • 3The company explicitly states these changes will have no impact on reported net interest income, total noninterest expense, or net income.
  • 4Net Interest Margin (NIM) calculation will be simplified: net interest income divided by average total interest-earning assets.
  • 5CFG will now report Net Interest Income and NIM on a fully taxable-equivalent (FTE) basis.
  • 6Noninterest expense disclosure will be simplified by combining 'equipment expense' and 'amortization of software' into 'equipment and software expense'.
  • 7Supplemental historical financial information for 2017 and 2018 has been provided to help investors understand the impact of these presentation changes.

Frequently Asked Questions

No, Citizens Financial Group explicitly states that these changes in presentation methodology will have no impact on reported net interest income, total noninterest expense, or net income. The goal is to improve clarity and comparability, not to alter financial results.

The calculation for NIM will be simplified. Previously, it involved a more complex calculation considering interest yield on assets and interest-bearing liabilities. The new methodology will be net interest income, annualized based on the actual number of days in the period, divided by average total interest-earning assets for the period.

Presenting on a fully taxable-equivalent (FTE) basis adjusts for the tax benefits of holding tax-exempt loans and investments. It essentially 'grosses up' the income from tax-exempt sources to reflect what it would be if it were taxable, allowing for a more accurate comparison of net interest income and NIM across different portfolios and with peers.

Citizens Financial Group has provided supplemental historical quarterly and full-year financial information for 2017 and 2018 in Exhibit 99.1 of this Form 8-K filing. This exhibit is designed to help investors understand how the company's financial metrics would have been presented under the new disclosure approaches.