On Wednesday, Citi reiterated its Buy rating on Citizens Financial Group (NYSE:CFG) stock with a steady price target of $45.00. The company's recent earnings were highlighted by a core pre-provision net revenue (PPNR) that surpassed expectations, bolstered by a strong performance in capital markets. Net interest income (NII) met forecasts, despite a decrease in deposit balances which was counterbalanced by a reduction in deposit costs.
The management's revised outlook anticipates a rebound in NII and net interest margin (NIM) in the fourth quarter of 2024, a shift from the previous expectation of a second-quarter trough. The guidance for the third quarter NII indicates a decline of 1-2%, which falls short of the anticipated 1% increase. This includes the effects of forward-starting swaps initiated in July. The second half of 2024 is expected to see a $24 million greater impact from swaps than previously anticipated, estimated to present a 1.7% challenge to the year's NII.
Citizens Financial's PPNR is on track, with management noting that NII is trending toward the higher end of the projected 6-9% decrease due to lower loan balances. Fee income is slightly above expectations, and expenses are generally as anticipated. Credit metrics showed no surprises, with non-performing loans (NPLs) increasing by a modest 4%, and management is forecasting lower net charge-offs (NCOs) in the third quarter.
The company's Common Equity Tier 1 (CET1) ratio improved by 10 basis points, reaching 10.7%. Additionally, Citizens Financial repurchased $200 million of its shares and anticipates buybacks of $250-$300 million in the third quarter.
In other recent news, Citizens Financial Group has made significant strides in its financial and operational performance. The company reported a net interest margin of 2.91% and fee growth of 3% in the first quarter, with a share repurchase of $300 million maintaining a robust Common Equity Tier 1 (CET1) ratio of 10.6%. However, non-accrual loans witnessed an 8% increase.
In a recent corporate restructuring, Citizens Financial Group redeemed all outstanding shares of its 6.350% Fixed-to-Floating Rate Non-Cumulative Perpetual Preferred Stock, Series D. This move, part of a broader restructuring, was accompanied by the filing of a Restated Certificate of Incorporation with the Delaware Secretary of State.
In terms of leadership transitions, the company announced the resignation of Jack Read, the Corporate Controller and Chief Accounting Officer, effective August 7, 2024. John F. Woods will serve as the interim replacement. Strengthening its market presence, Citizens Financial Group appointed Jim Weiss as the new Florida market president.
Analysts have also provided insights on the company's performance. Deutsche Bank (ETR:DBKGn) reaffirmed its Buy rating on Citizens Financial Group, making a slight adjustment to its earnings forecast for the second quarter. Piper Sandler upgraded the company's stock rating to 'Overweight' from 'Neutral', citing a solid capital base, while Argus and Citi increased their price targets for the company. These recent developments reflect the company's strategic initiatives and financial stability.
InvestingPro Insights
As Citi maintains a bullish stance on Citizens Financial Group (NYSE:CFG), real-time data and insights from InvestingPro further enrich the investment narrative. With an adjusted market capitalization of $18.02 billion and a trailing P/E ratio of 13.79, CFG exhibits a solid valuation framework. Notably, the company's dividend yield stands at an attractive 4.24%, with a consistent history of dividend payments over the past 11 years, which may appeal to income-focused investors.
InvestingPro Tips reveal that analysts have recently revised their earnings projections upwards for CFG, signaling confidence in the company's financial prospects. Additionally, the stock's performance has been robust, with significant returns over the past week, month, and three months, indicating strong investor sentiment. For those interested in gaining deeper insights and more InvestingPro Tips for CFG, there are additional tips available, which can be accessed through the InvestingPro platform. Investors can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, offering a comprehensive toolkit for informed decision-making.
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