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Strategic Buyouts and Loans to Aid Citizens Financial (CFG)

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Citizens Financial Group’s (CFG - Free Report) focus on revenue growth organically and through strategic acquisitions, and efficiency initiatives is anticipated to support the bank’s financials despite the low interest rates. Further, a strong capital position is likely to help sustain its capital-deployment activities.

Citizens Financial’s efforts to drive efficiency improvement and boost revenues resulted in the introduction of the “Tapping Our Potential” (TOP) program in late 2014, which has helped achieve substantial cost savings. Besides, the company has announced the TOP 6 Program, which is projected to generate $400-$425 million in pre-tax run-rate benefit by 2021.

Moreover, the company’s loans and deposits witnessed a CAGR of 3.4% and 7.6%, respectively, over the last five years (2016–2020). Citizens Financial has also been benefiting from its increasing non-interest-bearing deposits balance that provides a low-cost funding base. These, along with the company’s strategic buyouts over the past years and expected improvement in U.S. economy, position the company well for growth.

Citizens Financial is also focused on maintaining a solid capital base. Aided by this, the company’s capital deployment looks impressive. Following the Federal Reserve’s approval to buy back shares (that had been suspended since mid-March 2020 due to the coronavirus crisis) at the end of 2020, the company’s board has approved a repurchase program of up to $750 million worth of shares, beginning first-quarter 2021. In addition, this January, management increased its common stock dividend by 8%. Also, the bank targets medium-term dividend payout ratio of 35-40%.

Over the past six months, shares of Citizens Financial have appreciated 82.9%, outperforming the industry’s 56.6% rally. Moreover, the company’s earnings estimates have shown a favorable trend. The Zacks Consensus Estimate has moved 11.8% and 5% upward for 2021 and 2022, respectively, over the past 30 days. Currently, the stock sports a Zacks Rank #1 (Strong Buy).

However, Citizens Financial has been witnessing a contraction in net interest margin (NIM) for the past two years mainly due to lower interest rates and flattening of yield curve. Despite decent loan demand, the NIM might remain under pressure in the near term due to the Fed’s accommodative policy stance.

Other Stocks to Consider:

WSFS Financial Corporation (WSFS - Free Report) recorded an upward earnings estimate revision of 7.4% for 2021 over the past 30 days. The stock, which has surged 85.5% over the past six months, currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northfield Bancorp, Inc. NFBK witnessed an upward earnings estimate of 14% for the current year in the past 30 days. Shares of the company have rallied 48.4% over the past six months. At present, it flaunts a Zacks Rank of 1.

Virtu Financial, Inc.’s (VIRT - Free Report) earnings estimate for the ongoing year has moved 27% north in 30 days’ time. In the past six months, the company’s shares have gained 3.2%. Currently, it sports a Zacks Rank of 1.

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