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Why Is Citizens Financial Group (CFG) Up 1.4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Citizens Financial Group (CFG - Free Report) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Citizens Financial Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Citizens Financial Q3 Earnings Top Estimates, Loans Rise

Citizens Financial has reported underlying third-quarter 2021 earnings per share of $1.22, surpassing the Zacks Consensus Estimate of $1.19. Also, the bottom line rose 67% from the year-ago quarter figure.

Benefits from provisions and a marginal rise in loan balances were positives. Further, strong capital and credit quality were the driving factors. However, a decline in revenues on low fee income was a headwind.

Net income was $530 million compared with $314 million reported in the prior-year quarter.

Revenues Decline on Lower Fee Income, Costs Flare Up

Total revenues for the third quarter were $1.66 billion, outpacing the consensus estimate of $1.64 billion. However, the top line was down 7% year over year.

Citizens Financial’s net interest income rose 1% year over year to $1.1 billion. The NIM contracted 10 basis points (bps) to 2.72%. This was, however, partly mitigated by an improved funding mix and deposit pricing.

The non-interest income fell 21% year over year to $514 million. The downside stemmed largely from the $179-million fall in mortgage banking fees and an $11-million decline in other income.

Non-interest expenses shot up 3% year over year to $1 billion.

The underlying efficiency ratio of 61% in the third quarter increased from 55% in the year-ago quarter.

As of Sep 30, 2021, period-end total loan and lease balances rose 1% sequentially to $123.3 billion. Also, total deposits improved 1% to $152.2 billion.

Credit Quality Strong

Reflecting a solid credit performance and improvement in the macroeconomic outlook, the provision for credit losses witnessed a reversal of $33 million compared with $428 million provision expenses witnessed in the year-ago quarter. Moreover, net charge-offs for the quarter plunged 80% to $44 million.

Non-accrual loans and leases were down 42% to $747 million. As of Sep 30, 2021, the allowance for credit losses fell 27% to $2 billion.

Capital Position Robust

Citizens Financial was well-capitalized in the third quarter. As of Sep 30, 2021, the common equity tier-1 capital ratio was 10.3% compared with 9.8% at the end of the prior-year quarter. Further, the tier-1 leverage ratio was 9.7%, up from 9.5% in the prior-year quarter. The total capital ratio was 13.4%, up from 13.3% in the prior-year quarter.

Capital Deployment Update

The company made no share repurchases in the quarter. Notably, including common stock dividends, it returned $167 million to shareholders.

Outlook (CFG standalone)

All comparisons are made on a sequential basis.

The underlying fourth quarter NII is expected to be broadly stable or down slightly, given lower Paycheck Protection Program (PPP) forgiveness benefit.
Management expects fourth-quarter average loan growth of 1.5-2% with spot loans up about 3%. Excluding PPP, average loan growth of 2.5-3% with spot loans up about 4% is anticipated.

Underlying fee income for the fourth quarter is expected to be broadly stable, reflecting an improvement in capital markets, partially offset by seasonal impacts in the mortgage business.

Non-interest expenses are expected to be broadly stable in the fourth quarter. The company expects relatively stable net charge offs to be broadly stable, with provision expenses less than net charge-offs.

The company expects new customer-friendly checking features rolled out in October to offset any further rebound in overdraft fees, with service charges for 2022 expected to stabilize around the 2021 year-to-date annualized level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Citizens Financial Group has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.


Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Citizens Financial Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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