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Citizens (CFG) to Cease Its Indirect Auto Loan Originations

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Citizens Financial Group, Inc. (CFG - Free Report) announced that it will stop originating indirect auto loans, effective from Jul 1, 2023. The decision was taken as a part of the strategy to optimize its balance sheet and concentration on relationship-based lending.

The company began to reduce the number of active dealer relationships and de-emphasize its auto loan origination volume in third-quarter 2022. Nonetheless, the existing auto loans on its balance sheet will be retained and serviced by CFG.

As of Mar 31, 2023, Citizens had outstanding automobile loans and leases worth $11.5 billion, down 6.2% sequentially and 20.1% from the prior-year quarter.

Post the discontinuation of indirect auto loans origination, the centralized servicing operations are likely to provide excellent service to its auto loan customers.

Eric J. Schuppenhauer, the head of consumer lending at Citizens stated, “As Citizens continues to optimize its balance sheet, this decision further enables us to lend in areas that provide better risk adjusted returns and improved opportunities to deepen relationships with our customers.”

Our Take

Over the past years, CFG has been undertaking several acquisitions to improve its operations.

Last year, the acquisition of HSBC branches added approximately $6.3 billion of low-cost deposits and created a strong franchise in the greater New York City, Philadelphia Metro areas, and in New Jersey.

It also acquired Investors in April 2022, further strengthening its banking franchise and boosting the consumer customer base.

Apart from such inorganic moves, Citizens’ focus on executing a series of revenue and efficiency initiatives led to the introduction of “Tapping Our Potential” (TOP) program in late 2014. The company has launched its TOP 8 program, targeting around $100 million pre-tax run-rate by 2023 end.

However, over the past six months, shares of CFG have declined 26.7% compared with the industry’s fall of 25.9%.

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

Restructuring Efforts by Other Stocks in the Finance Sector

As part of its plans to exit retail banking in Italy, Barclays PLC (BCS - Free Report) is searching for bidders for its Italy mortgage loans. Per a Bloomberg report, citing people with knowledge of the matter, BCS is seeking to sell €5 billion ($5.3 billion) of its mortgage loans in the country.

Per the people with knowledge of the matter, BCS has started the divestiture process for a portfolio of mainly performing loans to individuals, while the package also includes non-performing mortgages and high-risk loans in Swiss francs.

The persistent slowdown in the investment banking (IB) business has led Morgan Stanley (MS - Free Report) to consider cutting around 7% of jobs in the Asia-Pacific region (excluding Japan), per the persons familiar with the matter. This is part of the broader 3,000 IB job cuts announced by the company. The development was first reported by Bloomberg News.

Of the total cuts by MS, China is likely to take the biggest hit as slowing economic growth in the country is curbing dealmaking.  Last year, MS had slashed roughly 50 IB jobs in the Asia-Pacific region, with a large number being China-focused positions.

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