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What's in Store for Citizens Financial (CFG) in Q2 Earnings?
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Citizens Financial Group (CFG - Free Report) is scheduled to report second-quarter 2023 earnings on Jul 19, before market open. The company’s revenues are expected to have witnessed year-over-year improvement while its earnings are likely to have declined.
In the last reported quarter, CFG’s earnings missed the Zacks Consensus Estimate due to a rise in expenses, lower non-interest income and higher provisions. Nonetheless, results reflected an increase in net interest income (NII), supported by higher rates and growth in interest-earning assets.
Citizens Financial has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the surprise being 1.58%, on average.
Citizens Financial Group, Inc. Price and EPS Surprise
Loans: The lending environment weakened in the quarter under review with the pace of loan growth across most categories slowing down. Per Fed’s latest data, commercial and industrial loans as well as commercial real estate loans declined sequentially in the first two months of the quarter under review. Further, the challenging macroeconomic backdrop and high interest rates adversely impacted consumer spending, affecting automobile and education loans. Hence, CFG is expected to have witnessed a slowdown in loan growth.
Nonetheless, past bank acquisitions and a strong franchise in the greater New York City and Philadelphia Metro areas are expected to have helped CFG in navigating the challenged lending environment.
We estimate average loans and leases for the quarter under review to be $160.14 billion, up 1% sequentially.
NII: Fed increased rates by 25 basis points in May and then kept the rates unchanged at 5-5.25% during the June FOMC meeting. With high interest rates, the company is expected to have seen an increase in funding costs. This is likely to have affected NII to some extent in the second quarter.
Moreover, a weaker lending environment is likely to have adversely impacted NII on a sequential basis. Management expects NII to be down 3% sequentially.
The Zacks Consensus Estimate for NII is pegged at $1.59 billion, suggesting a 3.5% decrease from the prior quarter. Our estimate of $1.58 billion implies a 3.3% sequential decrease.
Fee Income: Trust and investment services fees are likely to have declined on the back of lower asset values. Nonetheless, the consensus mark is pegged at $65 million, indicating a 3.2% increase from the prior quarter’s reported figure. Our estimate for the metric is $65.9 million.
In the to-be-reported quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates has taken a toll on the origination market. Thus, both purchase and refinancing originations are expected to have declined compared with the prior-year quarter.
These factors are expected to have lowered Citizens Financial’s mortgage banking fees in the to-be-reported quarter. Nonetheless, our estimate of $65.3 million indicates a rise of 14.6% sequentially.
Global deal making is likely to have continued shrinking in the quarter to be reported from the prior year, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Therefore, CFG’s capital market fees are likely to have declined in the to-be-reported quarter.
Nonetheless, past acquisitions to enhance its advisory competencies might have aided amid industry headwinds.
Citizens Financials’ efforts to enhance deposit balances on the back of past acquisitions are likely to have aided service charges and fees revenues in the quarter under review. The Zacks Consensus Estimate is pegged at $106 million, indicating a 6% increase from the prior quarter’s levels. Our estimate for the metric is $110.7 million.
Higher market volatility and high interest rates along with expectations of increased client foreign exchange hedging activity are likely to have aided Citizens Financials’ foreign exchange and derivative products income. Our estimate for the metric is pegged at $48.6 million, indicating a 1.4% rise sequentially.
Further, the high interest rates and rising inflation are expected to have increased transactions and spending volumes, thereby supporting CFG’s card fees in the quarter to be reported. The consensus mark is pegged at $75 million, indicating a 4.2% increase from the prior quarter’s reported figure. Our estimate for the metric is $74.8 million.
Per management, non-interest income is anticipated to be up mid-high-single digits on a sequential basis. Further, the consensus estimate is pegged at $517 million, suggesting a 6.6% sequential increase. Our estimate for the metric is $523.4 million.
Expenses: Despite its ongoing TOP 8 efficiency initiatives, Citizens Financial’s expenses are expected to have flared up on franchise expansion nationally and investments in newer technologies. Moreover, general inflationary pressures are likely to have inflated costs whereas wage inflation is anticipated to have escalated personnel expenses.
Nonetheless, management projects underlying non-interest expenses to be up stable to slightly down on a sequential basis.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for CFG this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat which is not the case here.
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 Financial is -3.53%.
Zacks Rank: Citizens Financial currently carries a Zacks Rank of 5 (Strong Sell).
The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.01 and has moved 1% downward over the past week, reflecting the bearish sentiments of analysts. This indicates a decline of 11.4% from the prior-year quarter. Nonetheless, the consensus mark for revenues is pegged at $2.1 billion, indicating a rise of 4.91% year over year.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
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What's in Store for Citizens Financial (CFG) in Q2 Earnings?
Citizens Financial Group (CFG - Free Report) is scheduled to report second-quarter 2023 earnings on Jul 19, before market open. The company’s revenues are expected to have witnessed year-over-year improvement while its earnings are likely to have declined.
In the last reported quarter, CFG’s earnings missed the Zacks Consensus Estimate due to a rise in expenses, lower non-interest income and higher provisions. Nonetheless, results reflected an increase in net interest income (NII), supported by higher rates and growth in interest-earning assets.
Citizens Financial has a decent earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the surprise being 1.58%, on average.
Citizens Financial Group, Inc. Price and EPS Surprise
Citizens Financial Group, Inc. price-eps-surprise | Citizens Financial Group, Inc. Quote
Factors at Play
Loans: The lending environment weakened in the quarter under review with the pace of loan growth across most categories slowing down. Per Fed’s latest data, commercial and industrial loans as well as commercial real estate loans declined sequentially in the first two months of the quarter under review. Further, the challenging macroeconomic backdrop and high interest rates adversely impacted consumer spending, affecting automobile and education loans. Hence, CFG is expected to have witnessed a slowdown in loan growth.
Nonetheless, past bank acquisitions and a strong franchise in the greater New York City and Philadelphia Metro areas are expected to have helped CFG in navigating the challenged lending environment.
We estimate average loans and leases for the quarter under review to be $160.14 billion, up 1% sequentially.
NII: Fed increased rates by 25 basis points in May and then kept the rates unchanged at 5-5.25% during the June FOMC meeting. With high interest rates, the company is expected to have seen an increase in funding costs. This is likely to have affected NII to some extent in the second quarter.
Moreover, a weaker lending environment is likely to have adversely impacted NII on a sequential basis. Management expects NII to be down 3% sequentially.
The Zacks Consensus Estimate for NII is pegged at $1.59 billion, suggesting a 3.5% decrease from the prior quarter. Our estimate of $1.58 billion implies a 3.3% sequential decrease.
Fee Income: Trust and investment services fees are likely to have declined on the back of lower asset values. Nonetheless, the consensus mark is pegged at $65 million, indicating a 3.2% increase from the prior quarter’s reported figure. Our estimate for the metric is $65.9 million.
In the to-be-reported quarter, mortgage rates continued to increase, with the rate on 30-year fixed mortgage reaching 6.81% in June, up from 4.6% reported in the prior-year quarter. The climb in mortgage rates has taken a toll on the origination market. Thus, both purchase and refinancing originations are expected to have declined compared with the prior-year quarter.
These factors are expected to have lowered Citizens Financial’s mortgage banking fees in the to-be-reported quarter. Nonetheless, our estimate of $65.3 million indicates a rise of 14.6% sequentially.
Global deal making is likely to have continued shrinking in the quarter to be reported from the prior year, with deal volume and total deal value numbers crashing. Geopolitical tensions, inflation, high interest rates and fears of a global recession are likely to have acted as headwinds for merger and acquisition deals. Therefore, CFG’s capital market fees are likely to have declined in the to-be-reported quarter.
Nonetheless, past acquisitions to enhance its advisory competencies might have aided amid industry headwinds.
Citizens Financials’ efforts to enhance deposit balances on the back of past acquisitions are likely to have aided service charges and fees revenues in the quarter under review. The Zacks Consensus Estimate is pegged at $106 million, indicating a 6% increase from the prior quarter’s levels. Our estimate for the metric is $110.7 million.
Higher market volatility and high interest rates along with expectations of increased client foreign exchange hedging activity are likely to have aided Citizens Financials’ foreign exchange and derivative products income. Our estimate for the metric is pegged at $48.6 million, indicating a 1.4% rise sequentially.
Further, the high interest rates and rising inflation are expected to have increased transactions and spending volumes, thereby supporting CFG’s card fees in the quarter to be reported. The consensus mark is pegged at $75 million, indicating a 4.2% increase from the prior quarter’s reported figure. Our estimate for the metric is $74.8 million.
Per management, non-interest income is anticipated to be up mid-high-single digits on a sequential basis. Further, the consensus estimate is pegged at $517 million, suggesting a 6.6% sequential increase. Our estimate for the metric is $523.4 million.
Expenses: Despite its ongoing TOP 8 efficiency initiatives, Citizens Financial’s expenses are expected to have flared up on franchise expansion nationally and investments in newer technologies. Moreover, general inflationary pressures are likely to have inflated costs whereas wage inflation is anticipated to have escalated personnel expenses.
Nonetheless, management projects underlying non-interest expenses to be up stable to slightly down on a sequential basis.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for CFG this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat which is not the case here.
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 Financial is -3.53%.
Zacks Rank: Citizens Financial currently carries a Zacks Rank of 5 (Strong Sell).
The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.01 and has moved 1% downward over the past week, reflecting the bearish sentiments of analysts. This indicates a decline of 11.4% from the prior-year quarter. Nonetheless, the consensus mark for revenues is pegged at $2.1 billion, indicating a rise of 4.91% year over year.
Stocks That Warrant a Look
First Citizens BancShares, Inc. (FCNCA - Free Report) and Byline Bancorp, Inc. (BY - Free Report) are a couple of stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.
FCNCA has an Earnings ESP of +3.21% and currently carries a Zacks Rank #3. It is slated to report second-quarter 2023 results on Aug 8. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for FCNCA’s second-quarter earnings has moved 4.3% south over the past 30 days.
BY currently has an Earnings ESP of +3.59% and a Zacks Rank #3. It is scheduled to release second-quarter 2023 results on Jul 27.
The Zacks Consensus Estimate for BY’s second-quarter earnings has remained unchanged over the past 60 days.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.