Citizens Financial Group, Inc. (CFG - Free Report) is a regional bank set to cash in as interest rates rise. This Zacks Rank #1 (Strong Buy) is growing its earnings by the double digits as it expands its fee services and sees strong loan growth.
Citizens Bank is a regional bank headquartered in Providence, Rhode Island with $147 billion in assets as of September 30, 2016. It offers retail and commercial banking products to individuals, small businesses, middle market companies and large corporations.
The Move to Online Investing It has 1,200 Citizens Bank branches in 11 states in the New England, Mid-Atlantic and Midwest areas.
On Dec 1, it announced it was expanding its Citizens Investment Services to offer digital investing capabilities as part of its Wealth Management platform.
It will be offered through SigFig, a Silicon Valley financial start-up that offers an online investing platform through its mobile app.
It will give customers the ability to fund investing strategies through an existing bank or brokerage account.
Citizens has been expanding its wealth management services.
The Turnaround Plan Continues
Citizens is executing its turnaround plan which is growing loans, investing in fee services and controlling costs.
It beat earnings again in the third quarter, beating the Zacks Consensus Estimate by 3 cents. Earnings were $0.52 compared to the Zacks Consensus of $0.49.
In the third quarter, it hired 47 mortgage loan officers and 11 financial consultants bringing the company-wide totals to 500 mortgage originators and 350 financial consultants by the end of the quarter.Citizens believes the consumer is healthy. It is seeing home refinancing and consolidation of education loans.
In Commercial Banking, it generated 11% average loan growth quarter over quarter as it made progress in mid-corporate and industry verticals, commercial real estate and franchise finance.
Treasury Solutions fee income was up 10% from the third quarter of 2015.
Estimates Rise for 2017
The last few years, since the company went public, it has seen strong earnings growth.
The analysts like what they heard in the third quarter but they especially liked the mid-quarter update which showed the loan growth accelerating. 3 estimates were raised in the last week after the mid-quarter update.
The 2017 Zacks Consensus Estimate has risen to $2.17 from $2.06 in the last 60 days. That's earnings growth of 13.4% compared to last year.
Shares Spike: Too Late to Get In?
The banks have rallied to 2007 levels since the election. Citizens Financial has hit a new high.
It trades with a forward P/E of 17.9.
This is much more expensive than the average long-term P/E of the regional banks which is around 12.5x.
However, you also get a dividend, currently yielding 1.4%.
The bull rally has been swift since the election. Investors might want to wait for a pullback if they're concerned about valuations.
Otherwise, with interest rates poised to rise at a faster rate in 2017, and a growing economy, Citizens Financial is one regional bank you should have on your short list.
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Source:https://www.zacks.com/commentary/97622/bull-of-the-day-citizens-financial-cfg
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