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Citizens Financial (CFG) Rises 35.9% YTD: What's Driving it?

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Shares of Citizens Financial Group, Inc. (CFG - Free Report) have rallied 35.9% year to date compared with the S&P 500 and the industry’s growth of 11.4% and 30.9%, respectively. This impressive price performance can be attributed to the bank’s rising loan and deposit balances, and enhanced capital deployment initiatives. Also, its focus on revenues and efficiency initiatives continue to support financials.

Further, increased optimism driven by an accelerated recovery of the banking industry, an extensive vaccination drive, additional government spending and an expectation of robust economic growth favored the company’s price performance.

Moreover, this Zacks Rank #3 (Hold) stock has been witnessing upward earnings estimate revisions. Over the past 30 days, the Zacks Consensus Estimate for 2021 and 2022 have moved north by 1.4% and 0.7%, respectively.

Year-to-date Price Performance

Following factors are likely to support Citizens Financial’s steady price appreciation.

Factors in Detail

The key source of Citizens Financial’s earnings stability is its organic growth trajectory. The company’s loans and deposits witnessed a CAGR of 3.4% and 7.6%, respectively, over the last five years (2016–2020). Further, the company has been benefiting from its increasing non-interest-bearing deposits that provide a low-cost funding base. We believe that it is well positioned to grow further backed by gradually improving U.S. economy.

Further, the company continues to gain from its focus on executing a series of revenue and efficiency initiatives that led to the introduction of “Tapping Our Potential” (TOP) program in late 2014. The first three TOP programs helped to achieve $200 million cost savings target and delivered $215 million income benefit. Following this, the company launched a fresh set of initiatives in mid-2017 to ramp up its profitability — Top 4 program — which delivered pre-tax benefit of $115 million in 2018. Also, the TOP 5 program was successful and delivered a pre-tax benefit of $125 million by 2019-end. Notably, in an effort to drive efficiency improvement and fund additional growth and innovation investments, Citizens Financial introduced TOP 6 Program, which is expected to deliver $400-$425 million in pre-tax run-rate benefit by 2021.

The company’s capital deployment activities are notable. In January 2020, Citizens Financial’s increased its common stock dividend by 8%. Also, its board approved a share-buyback program of up to $750 million of its common stock, beginning first-quarter 2021, of which it returned $262 million to shareholders, in the form of share repurchases and common stock dividends during the first three months of 2021. Further, it targets medium-term dividend payout ratio of 35-40%. Hence, its capital deployments seem viable on the back its solid earnings performance over past few quarters and a robust balance sheet position.

Its earnings have witnessed a rise of 11.86% in the past three-five years compared with the industry’s growth of 9.81%. The momentum is anticipated to continue in the quarters ahead. The company’s long-term (three-five years) expected earnings growth rate of 34% promises rewards for shareholders.

Citizens Financial is part of that Zacks industry, which currently carries a Zacks Industry Rank #3 (placing it at the top 19% of more than 250 Zacks industries). The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Stocks to Consider

Western Alliance Bancorporation’s (WAL - Free Report) earnings estimate for the current year has moved north in 60 days’ time. Further, the company’s shares have surged 86.2% over the past six months. At present, it carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Berkshire Hills Bancorp, Inc. (BHLB - Free Report) has witnessed upward earnings estimate revision for current year in the past 30 days. This Zacks #1 Ranked stock has appreciated 55.9% over the past six months.

Citizens Community Bancorp, Inc. (CZWI - Free Report) has witnessed upward earnings estimate revisions for 2021 over the past 30 days. Moreover, this Zacks Rank #1 stock has gained 49.7% over the past six months.

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