Citi lifts Citizens Financial target to $58, maintains buy

On Wednesday, Citi analyst Keith Horowitz increased the price target on Citizens Financial Group (NYSE:CFG) to $58 from the previous $50, while reiterating a Buy rating on the stock. Horowitz highlighted Citizens Financial Group as the top pick among regional banks, citing several factors contributing to this optimistic stance.

The analyst pointed out that while the headwinds from forward swaps reached their peak in the third quarter, the bank is expected to benefit from fixed rate asset repricing tailwinds through the end of 2026. This is anticipated to drive robust growth in earnings per share (EPS) and adjusted tangible book value (TBV).

Despite these positive projections, Horowitz noted that Citizens Financial Group's stock continues to trade at a significant discount based on the firm's implied cost of equity (CoE) valuation analysis. This discount is believed to stem from the market's focus on the short-term outlook, rather than the bank's longer-term prospects.

Furthermore, the analyst sees potential for increased fee revenue, particularly from capital markets, and expects the bank to surpass credit expectations. Horowitz also underscored the bank's strong capital position, with a pro-forma Common Equity Tier 1 (CET1) ratio over 9%. He mentioned that Citizens Financial has actively repurchased shares, taking advantage of the stock's attractive valuation.

In conclusion, Horowitz stated that the raised target price to $58 is based on a lower CoE assumption, which remains the highest in Citi's bank universe. The entire bank universe's assumptions were updated to align with early cycle conditions. Additionally, the analyst maintains a conservative view on the bank's normalized return on tangible common equity (ROTCE), setting it at 13%, which supports the view that the new target price is still conservative.

In other recent news, Citizens Financial Group reported strong Q3 results despite a challenging environment, with an underlying net income of $392 million and earnings per share at $0.79. The company's private banking sector saw a significant increase, with deposits rising to $5.6 billion, up from $4 billion in the previous quarter. Despite a 2.9% decrease in net interest income, Citizens Financial expects a rebound in the fourth quarter.

Analyst firms DA Davidson, RBC Capital, and Citi have all recently adjusted their outlooks on Citizens Financial. DA Davidson raised the price target to $48.00, citing potential growth drivers such as the ongoing development of the private banking sector and the expansion in the metropolitan New York area. RBC Capital increased its stock price target to $45, highlighting the bank’s strategic moves for future profitability. Citi maintained a $50.00 price target, noting positive prospects despite a minor shortfall in performance compared to the Bank Index.

InvestingPro Insights

Recent data from InvestingPro adds weight to Citi analyst Keith Horowitz's optimistic outlook on Citizens Financial Group (NYSE:CFG). The bank's stock has shown impressive momentum, with a 74.51% price total return over the past year and a robust 28.72% return in the last six months. This aligns with Horowitz's view that the market may be undervaluing CFG's long-term prospects.

InvestingPro Tips highlight that Citizens Financial Group has maintained dividend payments for 11 consecutive years, demonstrating a commitment to shareholder returns that complements the share repurchases mentioned by Horowitz. Additionally, analysts predict the company will be profitable this year, supporting the positive earnings outlook discussed in the article.

The bank's P/E ratio of 18.09 and price-to-book ratio of 0.89 suggest that despite recent gains, the stock may still be undervalued, consistent with Horowitz's assessment of a significant discount in CFG's valuation. For investors seeking a deeper understanding of Citizens Financial Group's potential, InvestingPro offers 7 additional tips that could provide valuable insights into the company's financial health and market position.

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