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Citizens Financial (CFG) on a Buying Spree, To Nab JMP Group

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In a bid to augment its capital market capabilities, Citizens Financial Group, Inc. (CFG - Free Report) has clinched a definitive merger agreement with JMP Group LLC (JMP - Free Report) under which it will acquire JMP Group in an all-cash transaction.

JMP Group is a well-known capital market firm, providing investment banking services, like strategic advisory, equity research, and sales and trading focused mainly on the healthcare, technology, financial services and real estate sectors.

Donald McCree, vice chairman and head of commercial banking at Citizens Financial, noted, “The transaction brings us a strong platform based in San Francisco and New York, expanding both our range of services and our national presence.”

Joseph Jolson, founder and chairman of JMP Group, remarked, “We are energized by the opportunity to provide new strategic advisory and equities capabilities to Citizens’ corporate client base while simultaneously offering JMP Securities’ clients a highly complementary set of products and services as part of a leading U.S. depository institution.”

Deal Details

The company will shell out around $149 million in cash for the acquisition. This equates to $7.50 for each JMP Group share, indicating a premium of 2.9% from the trading price at Sep 7 close.

The merger agreement has been unanimously accepted by the companies’ boards of directors. As of Sep 1, 2021, the executive management and JMP Group’s board of director members owned around 60% of the company’s outstanding common shares.

Conditional on the JMP shareholders nod, the receipt of required regulatory approvals and satisfaction of other customary closing norms, the transaction is anticipated to close in the next quarter.

Post-closing, JMP will operate as Citizens Financial’s wholly-owned subsidiary.

Acquisition Benefits

The acquisition enhances Citizens Financial’s industry expertise and expands its product offerings. The buyout will add an institutional equities franchise — equity capital markets and research, and sales and trading capabilities — which will complement the company’s growing corporate banking and strategic advisory capabilities.

The deal will also foster growth and diversify Citizens Financial’s capital market platform and provide greater scale in key verticals like healthcare, technology, financials and real estate.

While accretion to the company’s financials is likely to be minimal, such enhancement in capabilities and the commercial banking segment will bolster fee income and help diversify the capital market revenue stream. Aside from this, the company can leverage JMP Group’s mid-corporate client base by expanding its geographical footprint into the Southeast, Texas and California.

Bottom Line

Supported by a solid balance sheet and strong liquidity position, Citizens Financial seems to be on an acquisition spree. The recent acquisition marks the company’s fourth purchase since May. It announced an agreement to acquire HSBC Bank’s 80 East Coast branches and the national online deposit business, followed by a cash-and-stock deal to merge with Investors Bancorp, Inc. (ISBC - Free Report) .

In August, it entered an agreement to acquire Willamette Management Associates to boost capabilities in commercial banking advisory operations.

We believe that such acquisition will facilitate the company to inflate its deposit and loan balances, and strengthen its product and service offering capabilities, thereby driving long-term growth. Also, amid the pandemic-led challenges and low interest rates, organic growth in net interest income has become challenging. Hence, the company’s efforts to seek revenues from fee-income sources will likely preserve the top-line momentum.

In late August, Investors Bancorp closed the previously announced acquisition of the eight New Jersey and eastern Pennsylvania branches of Berkshire Bank, the wholly-owned subsidiary of Berkshire Hills Bancorp, Inc. (BHLB - Free Report) .

In the past year, shares of Citizens Financial have jumped 57.1% compared with 55.5% growth of the industry it belongs to.

 

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Currently, Citizens Financial carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.