It has been about a month since the last earnings report for Citizens Financial Group (CFG Quick QuoteCFG - Free Report) . Shares have added about 6.2% in that time frame, outperforming 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 Q4 Earnings Top on NII, Provisions Hurt

Citizens Financial Group reported fourth-quarter 2022 underlying earnings per share of $1.32, surpassing the Zacks Consensus Estimate of $1.30. Also, the bottom line rose from $1.26 in the year-ago quarter.

Results reflect net interest income (NII) growth on solid loan and deposit balances. However, an escalation in expenses, lower non-interest income and a rise in provisions were the undermining factors.

Net income was $653 million, up 23% from the prior-year quarter.

In 2022, underlying earnings of $4.84 per share beat the consensus estimate of $4.31 but declined 9% year over year. Net income was $2.07 billion, down 11% from the prior year.

Revenues Rise on NII, Costs Up

Total revenues in the fourth quarter were $2.2 billion, missing the consensus estimate of $2.22 billion. However, the top line was up 28% year over year.
In 2022, total revenues came in at $8.02 billion, which missed the Zacks Consensus Estimate of $8.06 billion. The top line jumped 21% year over year.

Citizens Financial’s NII surged 51% year over year to $1.7 billion, backed by 22% growth in interest-earning assets and a higher net interest margin.

The net interest margin expanded 63 basis points to 3.29%, supported by the impact of higher yields on earning assets and loan growth.

The non-interest income decreased 15% to $505 million. A decline in capital market fees and mortgage banking fees largely led to the fall.

Non-interest expenses rose 17% to $1.24 billion.

The efficiency ratio of 56.4% in the fourth quarter fell from 61.7% in the year-ago quarter. A lower efficiency ratio indicates improved profitability.

As of Dec 31, 2022, period-end total loan and lease balances were $156.7 billion, relatively stable sequentially. Total deposits improved 1% to $180.7 billion.

Credit Quality Worsens

CFG’s provision for credit losses was $132 million against $25 million of provision benefit witnessed in the year-ago quarter. As of Dec 31, 2022, the allowance for credit losses increased 16% to $2.24 billion.

Further, net charge-offs jumped 96% to $88 million. Non-accrual loans and leases were up 34% to $944 million.

Capital Position Solid

As of Dec 31, 2022, the tier-1 leverage ratio was 9.3%, down from 9.7% in the prior-year quarter.

The common equity tier-1 capital ratio was 10% compared with 9.9% at the end of the prior-year quarter. Further, the total capital ratio was 12.8%, up from 12.7% in the prior-year quarter.

Share Repurchase Update

Citizens Financial resumed common stock repurchases during fourth-quarter 2022. During the quarter, the company repurchased shares worth $150 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Citizens Financial Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.

Outlook

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