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Citizens Financial (CFG) Enhances Share Buyback Program to $1B

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Following Federal Reserve’s green signal to banks’ capital plans after the 2022 Stress Test, Citizens Financial Group, Inc. (CFG - Free Report) updated its 2022 Capital Plan.

Specifically, CFG’s board of directors increased the common share repurchase authorization to $1 billion. This indicates an increase of $545 million over the $455-million remaining capacity under the $750-million January 2021 authorization.

The company also noted that its board of directors would consider hiking the quarterly common stock dividend for third-quarter 2022.

John F. Woods, vice chairman and chief financial officer, noted, “We are pleased that the Federal Reserve’s stress test results illustrate Citizens’ strong capital position and the resilience of our balance sheet and business model.”

Citizens Financial is focused on maintaining a strong capital base. As of Mar 31, 2022, the company’s Basel III capital ratios exceeded regulatory requirements, with a Common Equity Tier 1 (CET1) capital ratio and a total capital ratio of 9.7% and 12.5%, respectively. For 2022, management expects a CET1 ratio of 9.75-10%

Also, it remains committed to enhancing shareholders' value. In January 2020, the company increased its common stock dividend by 8%.

As of Mar 31, 2022, Citizens Financial held long-term borrowed funds worth $5.9 billion, which has been witnessing a declining trend over the past few quarters. As of the same date, its total available liquidity (including cash and due from banks, and interest-bearing cash and due from banks) stood at $9.9 billion. 

Given CFG’s steadily improving performance and strong liquidity position, its capital deployment activities are sustainable.

CFG has also been growing through acquisitions. In April, Citizens Financial completed the acquisition of Investors Bancorp for $3.39 billion, which strengthened its banking franchise and boosted the consumer customer base. This February, it closed the acquisition of 80 East Coast branches and the national online deposit business from HSBC. The acquisitions of Investors Bancorp, combined with the HSBC branches, create a strong franchise in the greater New York City and Philadelphia Metro areas, and New Jersey by adding 234 branches.

Apart from this, the acquisitions have strengthened the company’s balance sheet, creating a strong foundation for revenue growth. This, too, is likely to make capital deployment activities sustainable.

So far this year, shares of CFG have lost 23.5% compared with a 16.8% decline of the industry it belongs to.

 

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Image Source: Zacks Investment Research

 

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

The 2022 stress test indicated that larger banks are capable of withstanding micro/macro-economic shocks, remain handily above the regulatory capital requirements, and return more capital to shareholders. The notable ones announcing intentions to raise quarterly dividends are Goldman Sachs (GS - Free Report) and Morgan Stanley (MS - Free Report) .

Specifically, Morgan Stanley doubled its quarterly payouts, while GS wasn’t far behind with a 60% rise. 

Currently, MS and GS carry a Zacks Rank of 3.


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