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On Tuesday, Truist Securities updated its outlook on Citizens Financial Group (NYSE: NYSE:CFG), raising the price target from $49.00 to $54.00, while keeping a Hold rating on the stock. Currently trading at $48.58, the bank's shares are near their 52-week high of $49.25, having delivered an impressive 52.46% return over the past year.
According to InvestingPro analysis, the stock appears slightly overvalued at current levels. The revision comes after analyst Brian Foran increased earnings per share (EPS) estimates for the coming years, citing several factors that could potentially boost the bank's financial performance.
The new EPS forecasts for Citizens Financial Group stand at $4.06 for 2025, up from the previous $3.95 estimate, and at $5.15 for 2026, slightly higher than the earlier $5.13 projection. Foran's adjustment is based on a set of key elements including a higher federal funds neutral rate which is expected to elevate net interest margin (NIM) expectations, an anticipated rise in fee income, potential reserve releases, and ongoing share repurchase activities.
The analyst's projections for net interest income (NII) show a year-over-year increase of 5%, with fee income expected to grow by 8% and expenses to rise by 4%, aligning closely with management's expectations. For 2025, the NIM is projected to be 3.00%, consistent with the guidance provided by the bank's management, with a slight increase to 3.05% by the fourth quarter of the same year.
With a solid dividend yield of 3.53% and a 12-year track record of consistent dividend payments, Citizens Financial maintains a strong shareholder return profile. InvestingPro subscribers can access detailed financial health metrics, showing the bank maintains a GOOD overall financial health score of 2.56, along with 6 additional exclusive ProTips.
Despite these positive indicators, Foran also accounts for uncertainties in the yield curve movements and the company's ability to achieve its down-beta plan, leading to a more conservative NIM estimate of 3.40% for the fourth quarter of 2027, compared to the management's guidance of 3.50%. Furthermore, the analysis includes a gradual decrease in charge-off rates through 2025 and 2026, as well as reserve releases based on the management's guidance regarding improvements in the criticized Commercial portfolio.
Lastly, the report suggests a higher-than-consensus forecast for the fiscal year 2025 share repurchase amount, estimating $0.9 billion compared to the current consensus of approximately $0.7 billion. This estimate reflects the company's stated Common Equity Tier 1 (CET1) target of 10.50-10.75% for this year and is derived from Foran's risk-weighted assets (RWA) and retained earnings modeling.
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