Back to top

Image: Shutterstock

Citizens Financial (CFG) Aims to Boost Profitability: Time to Buy?

Read MoreHide Full Article

On Jan 4, we issued an updated research report on Citizens Financial Group (CFG - Free Report) . The company displays solid top-line growth and a strong capital position. Also, rising loan and deposit balances act as a tailwind. Further, its strategic initiatives to improve revenues and efficiency are impressive.

Further, the company’s earnings estimates for the current year have been revised slightly upward to $2.22 over the past 60 days. Currently, the stock carries a Zacks Rank #2 (Buy).

Shares of Citizens Financial have gained 46.3% over the past six months compared with the industry’s 30.8% growth.

The company remains committed to revamping profitability through ‘Tapping Our Potential’ (TOP) initiatives, which aim at enhancing revenues and efficiency. In July 2019, it introduced the TOP 6 Program, which is expected to achieve a pre-tax benefit of $300-$325 million by the end of 2021. Notably, the TOP 5 program was successful and delivered a pre-tax benefit of $125 million by 2019-end.

Further, the company’s loans and deposits recorded a CAGR of 4.7% and 5.1%, respectively, over the last five years (2015–2019). It has been benefiting from rising non-interest-bearing deposits that provide a low-cost funding base. We believe that Citizens Financial is well positioned to grow further backed by the gradual recovery of the U.S. economy.

Citizens Financial remains focused on maintaining a strong capital base. As of Sep 30, 2020, the company’s Basel III capital ratios, on a transitional basis, exceeded regulatory requirements, with a CET1 capital ratio and a total capital ratio of 9.8% and 13.3%, respectively. Notably, the company was successful in the Fed's second round of stress tests, which reflects its sound position.

However, the Providence, RI-based company’s non-interest expenses witnessed a CAGR of 4.2% over the last five years (2015-2019). Costs are likely to remain elevated due to the company’s investments in newer technologies and focus on building fee income capabilities organically.

Other Stocks to Consider

Some other top-ranked stocks in the same space are Fifth Third Bancorp (FITB - Free Report) , State Street Corporation (STT - Free Report) and Northwest Bancshares, Inc. (NWBI - Free Report) . All these stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fifth Third’s Zacks Consensus Estimate for earnings for the current year has been revised upward in the past 60 days. Also, its share price has increased 44.4% over the past six months.

State Street’s earnings estimates for the current year have witnessed upward revisions over the past 60 days. Further, the company’s shares have jumped 12.1% in six months’ time.

Northwest Bancshares’ Zacks Consensus Estimate for earnings for the current year has been revised upward over the past 60 days. Moreover, its shares have gained 30.3% in the past six months.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Published in