BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

NOTE 1 - BASIS OF PRESENTATION

Basis of Presentation

The unaudited interim Consolidated Financial Statements, including the Notes thereto of Citizens Financial Group, Inc., have been prepared in accordance with GAAP interim reporting requirements, and therefore do not include all information and Notes included in the audited Consolidated Financial Statements in conformity with GAAP. These unaudited interim Consolidated Financial Statements and Notes thereto should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying Notes included in the Company’s 2018 Form 10-K. The Company’s principal business activity is banking, conducted through its banking subsidiary, Citizens Bank, National Association.

The unaudited interim Consolidated Financial Statements include the accounts of the Company and subsidiaries in which the Company has a controlling financial interest. All intercompany transactions and balances have been eliminated. The Company has evaluated its unconsolidated entities and does not believe that any entity in which it has an interest, but does not currently consolidate, meets the requirements to be consolidated as a variable interest entity. The unaudited interim Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the ACL and the fair value of MSRs.

Significant Accounting Policies

For further information regarding the Company’s significant accounting policies, see Note 1 in the Company’s 2018 Form 10-K.

Accounting Pronouncements Adopted in 2019

Pronouncement	Summary of Guidance	Effects on Financial Statements
Derivatives and Hedging Issued August 2017	• Reduces the complexity and operational burdens of the current hedge accounting model and portrays more clearly the effects of hedge accounting in the financial statements. • Modifies current requirements to facilitate the application of hedge accounting to partial-term hedges, hedges of prepayable financial instruments, and other strategies. Adoption of these optional changes would occur on a prospective basis. • Requires the effects of fair value hedges to be classified in the same income statement line as the earnings effect of the hedged item. Adoption of this change will occur on a prospective basis. • Requires all effects of cash flow hedges to be deferred in other comprehensive income until the hedged cash flows affect earnings. Periodic hedge ineffectiveness will no longer be recognized in earnings. Adoption of this change will occur on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption.	• The Company adopted the new standard on January 1, 2019 under the modified retrospective method. • Adoption did not have a material impact on the Company’s Consolidated Financial Statements. • Required disclosures are included in Note 9.

Pronouncement	Summary of Guidance	Effects on Financial Statements
Leases Issued February 2016	• Requires lessees to recognize a right-of-use asset and corresponding lease liability for all leases with a lease term of greater than one year. • Requires lessees and lessors to classify most leases using principles similar to existing lease accounting, but eliminates the “bright line” classification tests. • Requires that for finance leases, a lessee recognize interest expense on the lease liability separately from the amortization of the right-of-use asset in the Consolidated Statements of Operations, while for operating leases, such amounts should be recognized as a combined expense. • Requires expanded disclosures about the nature and terms of lease agreements. • Provides the option to adopt using either a modified cumulative-effect approach wherein the guidance is applied to all periods presented, or through a cumulative-effect adjustment beginning in the period of adoption. • Requires companies with land easements to assess whether the easement meets the definition of a lease before applying other accounting guidance.	• The Company adopted the new standard under the modified retrospective approach on January 1, 2019, which is applicable to both its leasing finance business as well as property and equipment leases in which Citizens is lessee. • Adoption resulted in a cumulative-effect adjustment of $12 million, net of taxes, to retained earnings related to leases in which Citizens is lessee. • Adoption resulted in the recognition of a right-of-use asset and corresponding lease liability of $734 million and $749 million, respectively in its Consolidated Balance Sheet for non-cancelable operating lease agreements. • Required lessor disclosures are included in Note 3 and required lessee disclosures are included in Note 6.
Implementation Costs Incurred in a Cloud Computing Arrangement Issued August 2018	• Requires implementation costs incurred in a cloud computing arrangement that is a service contract be deferred and recognized over the term of the arrangement if those costs would be capitalized in a software licensing arrangement. • Requires amortization expense be presented in the same income statement line item as the related hosting service arrangement expense. • Permits adoption prospectively for all implementation costs incurred after adoption or retrospectively through a cumulative-effect adjustment as of the beginning of the first period presented.	• The Company prospectively adopted the new standard on January 1, 2019. • Adoption did not have a material impact on the Company’s Consolidated Financial Statements.

Accounting Pronouncements Pending Adoption

Pronouncement	Summary of Guidance	Effects on Financial Statements
Financial Instruments - Credit Losses Issued June 2016	• Required effective date: January 1, 2020. • Replaces existing incurred loss impairment guidance and establishes a single allowance framework for financial assets carried at amortized cost (including securities HTM), which will reflect management’s estimate of credit losses over the full remaining expected life of the financial assets. • Amends existing impairment guidance for securities AFS to incorporate an allowance, which will allow for reversals of impairment losses in the event that the credit of an issuer improves. • Requires a cumulative-effect adjustment to retained earnings, net of taxes, as of the beginning of the reporting period of adoption. • Requires enhanced credit quality disclosures including disaggregation of credit quality indicators by vintage.	• The Company plans to adopt the new standard on January 1, 2020. • A company-wide, cross-discipline governance structure is in place to implement the new standard. • The Company is finalizing significant accounting policies and continues to refine and test loss forecasting models, estimation techniques, data, operational processes and financial controls which will be used to calculate the ACL under the standard. • The Company completed limited parallel runs and analytical testing through the nine months ended September 30, 2019. Parallel testing will continue through adoption and we will refine our interpretations, methodology, data and operational processes based upon ongoing reviews and testing results. • To estimate the ACL, we will use models and other estimation techniques that are sensitive to changes in forecasted economic conditions. The estimate is expected to include a two-year reasonable and supportable forecast period, and thereafter a one year reversion to long-run average macroeconomic assumptions derived from historical information. We will also apply qualitative factors related to idiosyncratic risk factors, changes in current economic conditions that may not be adequately reflected in quantitatively derived results, or other relevant factors to ensure the ACL reflects our best estimate of current expected credit losses. • The Company expects the standard will result in earlier recognition of credit losses and an overall increase in the ACL upon adoption of approximately 30% to 35%. This estimated increase in ACL is based on forecasted economic conditions and portfolio balances at August 31, 2019, and primarily related to consumer loans, such as residential mortgage, unsecured and education, due to the requirement to estimate credit losses over the full remaining expected life of the asset. Additionally, adoption of the new standard could produce higher volatility in the quarterly provision for credit losses than our current reserve process and could adversely impact the Company’s ongoing earnings. We estimate that this increase in ACL would reduce the Company’s CET1 capital ratio by approximately 22 to 25 basis points on a fully-phased in basis. This capital impact is expected to be phased in by 25% per year through January 1, 2023, which would impact 2020 by 5 to 6 basis points. • These current estimates of impact to the ACL at the adoption date and the CET1 capital ratio are subject to change based on continuing review and challenge of the models, assumptions, methodologies and judgments, and the final amount will depend upon the loan portfolio composition, as well as economic conditions and forecasts existing at that time. • Based on the credit quality of our existing debt securities portfolio, the Company does not expect the ACL for HTM and AFS debt securities to be significant.

Pronouncement	Summary of Guidance	Effects on Financial Statements
Disclosure Requirements - Fair Value Measurements Issued August 2018	• Amends disclosure requirements on fair value measurements. • The guidance eliminates requirements for certain disclosures that are no longer considered relevant or cost beneficial, requires new disclosures and modifies existing disclosures that are expected to enhance the usefulness of the financial statements. • Prospective application is required for new disclosure requirements. • Retrospective application is required for all other amendments for all periods presented.	• Required effective date: January 1, 2020. Early adoption is permitted. The Company does not intend to adopt this guidance prior to the required effective date. • Adoption is not expected to have a material impact on the Company’s Consolidated Financial Statements.