On Thursday, DA Davidson maintained a positive outlook on Citizens Financial Group (NYSE:CFG), raising the price target to $48.00 from $46.00 and reaffirming a Buy rating. The adjustment follows Citizens Financial Group's recent financial performance, where net interest income (NII) declined by 2.9% quarter over quarter, which was slightly below the company's mid-quarter projection of flat to a 2% decrease.
The firm anticipates that Citizens Financial Group's NII will see a modest recovery in the fourth quarter, with an expected increase of 1.5% to 2.5%. This forecast, however, falls short of DA Davidson's earlier prediction, leading to a revised 2025 earnings per share (EPS) forecast for the bank, now set at $3.89, down from the initial $4.07 estimate.
Despite the lowered EPS forecast, DA Davidson remains optimistic about the bank's future financial performance. The analyst cited several factors that could contribute to the company's growth, including the potential for strong operating leverage in the long term. The anticipated positive shift in the impact of swaps, starting in the fourth quarter of 2024, the ongoing development of the private banking sector, and the expansion in the metropolitan New York area were highlighted as potential growth drivers.
Moreover, the analyst expects that the headwind from noncore consumer loan runoff, which currently impacts earnings by $0.11, will diminish over time. This outlook underpins the firm's decision to reiterate their Buy rating and increase the price target for Citizens Financial Group's stock.
In other recent news, Citizens Financial has demonstrated robust performance in the face of economic challenges. The company reported an underlying net income of $392 million and earnings per share at $0.79 in the third quarter. Deposits in the company's private banking sector saw a significant increase, rising to $5.6 billion from $4 billion in the previous quarter. Despite a 2.9% decrease in net interest income, the company expects a rebound in the fourth quarter.
RBC Capital has raised its stock price target for Citizens Financial Group to $45 from $43, maintaining an Outperform rating. This adjustment follows the bank's recent expansion efforts, including the acquisitions of HSBC (LON:HSBA) and ISBC. Meanwhile, Citi has reiterated a Buy rating for Citizens Financial, maintaining the $50.00 price target. Both firms cite the company's strategic initiatives and capital strength as reasons for their ratings.
In other recent developments, Citizens Financial Group's capital position remains strong with a Common Equity Tier 1 (CET1) ratio of 10.6%. The company returned $516 million to shareholders through share repurchases and dividends this quarter.
InvestingPro Insights
To complement DA Davidson's analysis, recent data from InvestingPro offers additional context on Citizens Financial Group's financial position. The company's market capitalization stands at $18.82 billion, with a P/E ratio of 16.17, suggesting a reasonable valuation relative to earnings.
InvestingPro Tips highlight that Citizens Financial Group has maintained dividend payments for 11 consecutive years, which aligns with the stability that DA Davidson sees in the company. This consistent dividend history may be particularly appealing to income-focused investors in the current economic climate.
Moreover, the company has seen a significant price uptick over the last six months, with InvestingPro data showing a 31.27% total return. This performance supports DA Davidson's optimistic outlook and increased price target. The company's dividend yield of 3.96% further enhances its attractiveness to investors seeking income.
It's worth noting that while DA Davidson revised their EPS forecast downward, an InvestingPro Tip indicates that analysts still predict the company will be profitable this year. This aligns with the firm's overall positive stance on Citizens Financial Group's prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide deeper insights into Citizens Financial Group's financial health and market position.
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