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What's in the Offing for Citizens (CFG) in Q4 Earnings?

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Citizens Financial Group (CFG - Free Report) is scheduled to report fourth-quarter and 2021 results on Jan 19, before the opening bell. While its quarterly earnings are expected to have improved year over year, revenues are anticipated to have declined.

In third-quarter 2021, this Providence, RI-based bank surpassed the Zacks Consensus Estimate on a significant fall in provisions and a marginal rise in the loan balance. Further, strong capital and credit quality were the driving factors. However, a decline in revenues on low fee income was a headwind.

Citizens has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters, the surprise being 22.6%, on average.

Citizens Financial Group, Inc. Price and EPS Surprise

 

Citizens Financial Group, Inc. Price and EPS Surprise

Citizens Financial Group, Inc. price-eps-surprise | Citizens Financial Group, Inc. Quote

Factors at Play

Net Interest Income (NII): The lending scenario in the fourth quarter improved moderately as businesses reopened, corporate confidence rose and economic growth gained traction. Per the Fed’s latest data, the demand for commercial and industrial loans, commercial real estate loans, and residential real estate loans accelerated in the fourth quarter. Yet, high levels of pay downs and payoffs, and stiff loan pricing competition are likely to have hurt CFG’s loan volumes. This along with a persistently low-interest-rate environment is expected to have had some adverse impact on its NII and net interest yield in the quarter.

The Zacks Consensus Estimate of $1.13 billion for NII indicates a marginal decline from the prior quarter.

Management expects fourth-quarter NII to be broadly stable or down slightlyon a sequential basis, given the lower Paycheck Protection Program (PPP) forgiveness benefit. Fourth-quarter average loan growth of 1.5-2% is expected on a sequential basis, with spot loans rising 3%. Excluding PPP, average loan growth of 2.5-3% is anticipated, with spot loans rising 4%.

Fee Income: Continued strength in equity markets, driven by a modest spike in volatility and decent client activities, is likely to have boosted the company’s fee income. Trust and investment services fees are likely to be supported by an increase in assets under management from robust inflows and higher equity market levels.

Given the fading stimulus support, card spending is expected to have increased. Higher card use and activity are anticipated to have boosted card fees. The consensus mark for the same of $68 million indicates a rise from the prior quarter’s reported figure of $66 million.

Mortgage production continued to normalize in the fourth quarter. Also, moderation in refinancing activity due to the rise in rates is expected to have weighed on Citizens’ mortgage banking income. Thus, the consensus estimate for the same of $91 million suggests a 15.7% plunge sequentially.

In early October, Citizens eased the overdraft fee policy on checking accounts. This is expected to have offset any further rebound in overdraft fees in the fourth quarter, affecting non-interest income.

The consensus estimate for non-interest income is pegged at $534 million, suggesting a 3.9% sequential increase.

Management expects fourth-quarter fee income to be broadly stable sequentially, reflecting an improvement in capital markets, partially offset by seasonal impacts in the mortgage business.

Expenses: Despite its TOP 6 efficiency initiatives, Citizens’ expenses are expected to have flared up on investments in enhanced data analytics and technology to improve customer experience. The company projects non-interest expenses to be broadly stable in the fourth quarter.

Also, management aims TOP 6 Program to deliver $400-$425 million in pre-tax run-rate benefit by 2021 end.

Key Developments During the Quarter

In November, Citizens completed its previously announced merger agreement to acquire JMP Group. Citizens announced the all-cash deal in September in a bid to augment its capital market capabilities.

The buyout is also expected to foster growth, diversify Citizens’ capital market platform and provide greater scale in key verticals like healthcare, technology, financials and real estate.

Earnings Whispers

Citizens does not have the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat this time around.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP for Citizens is -0.49%.

Zacks Rank: The company currently carries a Zacks Rank of 3.

The Zacks Consensus Estimate for fourth-quarter earningsis pegged at $1.16, suggesting 11.5% growth from the year-ago reported number. However, the consensus mark of $1.66 billion for fourth-quarter revenues indicates a 2.5% year-over-year decline.

Stocks That Warrant a Look

BOK Financial (BOKF - Free Report) , The PNC Financial Services Group, Inc. (PNC - Free Report) and Huntington Bancshares Incorporated (HBAN - Free Report) are a few companies worth considering as these have the right combination of elements to beat on earnings in their upcoming releases, per our model.

BOK Financial has an Earnings ESP of +3.64% and a Zacks Rank of 2 (Buy) at present. BOKF is slated to report fourth-quarter and full-year results on Jan 19.

Over the past 30 days, BOKF’s Zacks Consensus Estimate for quarterly earnings has moved marginally downward.

PNC Financial is scheduled to release fourth-quarter 2021 and annual earnings on Jan 18. PNC, which is Zacks #3 Ranked at present, has an Earnings ESP of +2.29%. You can see the complete list of today’s Zacks #1 Rank stocks here.

PNC’s fourth-quarter earnings estimates have moved marginally lower over the past month.

Huntington Bancshares is scheduled to release earnings on Jan 21. HBAN, currently a #3 Ranked player, has an Earnings ESP of +1.46%.

The Zacks Consensus Estimate for Huntington Bancshares’ fourth-quarter earnings has been unchanged over the past month.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.