Citizens Financial (CFG) Declares SCB & Planned Capital Actions

Zacks Equity Research
·3-min read

The 2024 Fed’s stress test determined Citizens Financial Group, Inc.’s CFG preliminary Stress Capital Buffer (SCB) at 4.5%. This implied a regulatory minimum CET1 ratio of 9%, up from 8.5% in 2023.
 
According to the Federal Reserve's stress test results released on Jun 26, 2024, CFG is among the 31 U.S. banks that successfully passed the test.

While the regulatory requirement will be effective Oct 1, 2024, CFG expects the second-quarter 2023 CET1 ratio to be 160 basis points above the SCB. This underlines the capital strength of CFG and enables the bank to undertake organic growth initiatives and continue capital payouts.

The company’s board of directors expanded the capacity of its common share repurchase program by an additional $656 million, bringing the total authorizing capacity to $1.25 billion. During the first quarter of 2024, the company repurchased approximately $300 million in common shares. As of Mar 31, 2024, the company had a remaining share authorization of around $794 million. As of Jun 28, 2024, the company announced $594 million of remaining capacity under the repurchase program, indicating significant share repurchases undertaken during the quarter.

John F. Woods, vice chair and chief financial officer at CFG, said, “The Federal Reserve’s stress test results illustrate Citizens’ strong capital position, which is well in excess of our regulatory minimum,” He further added “We are pleased to report that our Board has approved an increase to our share repurchase authorization. The authorization reflects confidence in our ability to deliver strong financial performance while continuing to invest across our businesses and deliver attractive returns to shareholders. We will continue to operate within our targeted CET1 range of 10.0 to 10.5%.”

As of Mar 31, 2024, the company had total borrowed funds of $13.8 billion, while total available liquidity (comprising cash and due from banks, interest-bearing cash and due from banks, as well as interest-bearing deposits in banks) was $11.9 billion. Though its times' interest earned ratio declined sequentially in the first quarter of 2024 to 3.5, it remains decent. Given its steadily improving performance, decent liquidity position and capital strength, Citizens Financial’s capital distribution activities seem sustainable.

Some other participants from the test that are enhancing capital distribution plan post stress test results are JP Morgan Chase & Co JPM and Morgan Stanley MS. JPM approved a new common share repurchase program totaling $30 billion, beginning Jul 1, 2024. MS has renewed a multi-year common equity share repurchase program of up to $20 billion, effective from the third quarter of 2024, with no specified expiration date.

Shares of CFG have gained 7.5% in the past six months against the industry’s decline of 15.4%.

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At present, CFG carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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